Kevin Reed, Accountancy Age, Monday 21 June 2010 at 09:42:00

R3's departing Yorkshire chairman warns that HMRC Time to Pay tax arrearsscheme is being abused

HMRC will be lucky to collect 75% of the arrears built up in the Time to Payscheme, according toR3'sdeparting Yorkshire chairman.

Andy Wood, also a partner at the P&A Partnership, told theYorkshirePost that the taxman was more likely to recoup three-quartersof its tax arrears for businesses that used the scheme, compared to its 90%estimate.

Wood also raised concerns about the scheme being abused.

"I had a director say to me 'of course I was going to use that. I had apersonal guarantee, I needed to get the bank (debt] down'. I don't think he waseven worried about the taxman," said Wood.

"Many accountants said to me all they had to do was phone up and say 'I havegot a client who can't pay his VAT, can we have some type of arrears' and it wasdone on a phone call," he added.

HMRCtold the Post that officials were responsible for making decisions on offeringTTP, based on the individual circumstances of the claim.

The taxman has also been more likely to turn down TTP requests. A recentsurvey found 11% of applications were turned down in Q1 2010, compared to 5.3% ayear earlier.

HMRC is set to use a panel of insolvency practitioners to provide independentreviews of larger businesses that are applying for a TTP extension.

By 28 March 2010, HMRC had agreed 310,000 TTP arrangements, deferring almostŁ5.3bn in tax.

Further reading:

Taxmantoughens up on Time to Pay

Budget2010: Warning as Time to Pay scheme is extended

HMRCimposes tougher rules on Time To Pay