Around one in every thousand 'Time to Pay' request concerns an amount of £1 million or over. As the economy moves into recovery, it is important both for the businesses concerned and to protect taxpayers that HMRC can make an informed decision in these few, highly complex cases.
For this reason, the Chancellor announced in his Pre Budget Report (PBR) that with effect from April 2010 entities asking for additional time to pay a single or combined tax debt of over £1 million must provide HMRC with an Independent Business Review (IBR) to support their request.
The use of qualified Insolvency Practitioners and accountants to review the solvency and ongoing liquidity of firms is common practice amongst institutional lenders before finalising a lending or investment decision.
Commercially, IBRs provide a sound base from which management; lenders and investors can move forward giving the business, its lenders and other interested parties such as HMRC the greatest chance of ongoing success in terms of payment. Very often IBRs can provide insights and advice which add value for the business itself.
The cost of the IBR will be borne by the business, as is the norm in the commercial market and we expect this will range from £10k for a simple review to £50k for the most complex. We expect approx. 300-400 businesses annually to be affected, but additional costs will be small in relation to the size and turnover of the business and the benefits that will accrue by securing HMRCs ongoing support.
Typically an IBR would include the following:
Under the Commissioners’ powers of Collection and Management HMRC may agree an opportunity for the business to spread their HMRC total tax debt over a timetable they can afford by instalments; where doing so is likely to secure the best return for the Exchequer.
Over the last year HMRC has been supporting viable businesses in difficulty, notably through our Business Payment Support Service (BPSS). However, this facility is intended for small to medium-sized businesses and individuals. The largest cases have often come to Debt Management and Banking (DMB) directly, or have been referred from HMRCs Large Business Service.
These large cases are quickly transferred on to our Senior Managers and Operational Accountants for review but HMRC believes that there should be greater onus on large business to provide more detailed information that would be included in an IBR giving a more equitable distribution of support for the business.
The IBR will enable HMRC to decide on the most appropriate method of payment and how best to address those businesses that are unlikely to survive even with the help of a TTP. The information will also be used to ensure that our actions do not distort competition within the marketplace, which is what would happen if we agreed TTP in a case where the business was in fact able to pay us in full.
The IBR is not about denying TTP, rather improving our decision making to help those viable businesses that need our help and working with other stakeholders to provide the business with the best chance of ongoing viability.
HMRC will use the period following the PBR announcement to carry out an informal consultation with key representative groups; prior to commencing the implementation of IBRs by the 1 April 2010.
We would stress that this informal consultation is not about debating whether HMRC introduces the IBR process; moreover, it is to discuss the practicalities of how IBRs are to be implemented to best effect.
We propose setting the initial level for the IBR at £1 million for single or combined tax debts due, making it completely clear that:
We welcome your contributions and have set aside the following times and dates for external stakeholders to come and talk to us to discuss the implementation of this measure. The dates are:
Please send an email to Trevor England if you would like to attend, specifying your preferred date, plus the number and names of any additional colleagues who will be attending with you if applicable.
Trevor England
21 December 2009
Independent Business Reviews - Consultation Summary of Responses
Independent Business Reviews - Invitations for Expressions of Interest for inclusion on panel
