Tuesday, June 30, 2009

HMRC BPSS is prolonging the recession

I'm a great advocate of HMRC's Business Payment Support Service (BPSS). I thought it was a wonderful innovation when it was introduced last year - allowing businesses to spread the payment of their tax bills.

I was a little surprised to learn that they allow taxpayers to spread not just the tax payable on business profits but also VAT and PAYE. This is a real boon for cash strapped businesses and facilitates cheaper credit than might otherwise be available from the banks.

In conversation with a Business Restructuring expert last week I gained a new perspective. He told me that many of the companies that are being helped have severe credit problems which are not being addressed. They are simply being shunted on to next year.

My friend explained that the extended credit provided by HMRC is not comparable with the rescheduling arrangements that follow when a business is unable to pay other third party creditors.

Of course one is tempted to dismiss this warning as it's from someone who earns (part of) his living from helping cash strapped businesses enter into realistic payment plans with their creditors. HMRC's BPSS is giving some of his prospective clients a breathing space - as was always intended. But maybe there is also some truth in his warning that the recession will appear to last longer as businesses that are already bust will only go out of business next year due to the generosity of HMRC.

What do you think?


  1. I also feel that the BPSS is a good system however it should not be used in isolation.

    It offers a way to manage some of the business risk associated with cashflow however they need to look at some of the underlying reasons for challenges with their cashflow and address them.


  2. I agree there is no attempt at debt management and one gets the impression that the powers that be have instructed HMRC to indulge taxpayers, some of whom do, anecdotally, have no realistic chance of avoiding insolvency. A cynic might be tempted into thinking there will be a sea change in policy sometime next year, but not until after an election.

    The sadness of any political manipulation which may be present here is that there are possibly many companies and individuals who would be better advised to seek the benefit now of an attractive CVA/IVA but will miss out once the tide turns in due course.