The Pre-Budget Report announced the introduction of the Business Payment Support Service, which enabled businesses that are struggling to make their tax payments to come to an agreement with HMRC that will allow them to spread their payments.

Baker Tilly analysis

Businesses will welcome the continuation of the Business Payment Support Service, which has enabled firms struggling to make their tax payments to agree a payment time-frame with HMRC. By agreeing a suitable framework for payments, firms can avoid penalties and potential distraint action by HMRC, although they will continue to suffer an interest charge based on the date when the tax should have originally been paid.

In detail

The Business Payment Support Service was introduced in the Pre-Budget Report in November 2008 and enabled businesses struggling with their cash flow to make an agreement with HMRC to spread their tax payments. Since its launch over 100,000 agreements totalling £2 billion have been reached with businesses. Many companies have used the scheme as they grapple with increasingly difficult cash flow positions. The interest rate charged by HMRC on the late payment often compares favourably with the interest rate charged by commercial lenders, although firms must ensure that they comply with the terms of the agreement. HMRC will now also take into account losses made in the current trading period when agreeing the spreading of tax payments.