Whenever there is uncertainty, a lack of customer confidence is never far behind. Unfortunately, that can lead to increased cash flow pressures on businesses as they struggle to meet their obligations to suppliers and HM Revenue & Customs (“HMRC”) and when cash is tight, HMRC often fall to the bottom of the pile.
Most business owners will have heard of “Time to Pay” arrangements that can be agreed with HMRC, where arrears can be repaid over an agreed time frame. They are simple to arrange and can stop ongoing recovery action by HMRC. However, we often see companies using all of their available cash to repay the debt too quickly, leading to an inability to either meet the repayments, or leaving the business without enough cash to meet its ongoing commitments. Not only does this lead to the business struggling needlessly, we have also seen instances where it has also resulted in HMRC issuing a seven day notice of action to wind up the company.
It’s only natural that you would want to get an urgent matter off your desk. However, with time to pay agreements, there is often a benefit to taking the time to reflect upon what the business can offer, especially when HMRC expect that the debt will be repaid quickly. There are also other stipulations – you have to be able to meet the repayments as agreed, and all of your future HMRC liabilities must be paid on time and in full.
Taking these other elements into consideration and preparing a short term cash flow forecast, will help you identify the level at which you can afford to make the repayments, without putting your business under undue pressure. This can require you to take a step back and look at your business critically, which is often easier with the help of professional advisers.