The TTP scheme allows businesses to spread the cost of tax payments
Small businesses have been warned that they should avoid using the Government’s Time to Pay
(TTP) scheme as an alternative to seeking credit.
The TTP scheme allows customers who cannot pay tax to HMRC on its due date to make payments over a longer period, within their limits. Many small businesses use TTP as an alternative to seeking credit.
However, insolvency trade body R3 claimed yesterday (August 1) that although some companies are using the scheme for its intended purpose, others are applying speculatively.
President of R3 Frances Coulson has warned that these speculative applications are creating ‘zombie businesses’ and warned small business owners to consider their position carefully before applying to TTP.
A ‘zombie business’ is one that needs constant bailouts in order to continue to operate.
Coulson said: "Time to Pay has played a vital role in preventing the spike in corporate insolvency numbers that usually follows the end of a recession.
"Instead of Time to Pay being used as a breathing space for businesses undergoing a time of temporary difficulty to restructure their finances, it is in fact being used as an alternative credit facility, giving rise to 'zombie' businesses."
R2’s figures show that of £970 million owed in taxes to HMRC, only £320 million is scheduled to be paid. £650 million has not been paid as agreed.