Member Article

Over 11,000 North East Firms Delay Payments Of £180m

MORE THAN 11,000 north east businesses have delayed ‘crown payments’ totalling £180m in the last two years after signing up to a Government scheme designed to help firms battle the effects of the economic downturn.

New figures show that 3,550 new agreements to the value of £60m have been reached by firms in the region under HM Revenue & Customs’ Business Payment Support Service, or ‘Time To Pay’ scheme as it is more commonly known, up to the beginning of October this year.

But whilst the number of north east Time To Pay agreements has fallen rapidly since 2009, when over 7,500 firms took advantage of the scheme to delay payments of around £120m, industry experts are warning that the regional economy clearly isn’t yet out of the woods.

And Linda Farish, chairman of the north east arm of insolvency trade body R3 and director of Recovery & Insolvency at Newcastle-based accountants RMT, is also warning that HMRC’s statistics may be hiding the full extent of the business insolvency problems still facing the region.

The Business Payment Support Service scheme was introduced in late 2008 to allow companies to agree a delayed payment schedule for their PAYE, National Insurance and VAT obligations, in order to improve their cashflow and allow directors to reorganise a company’s finances to counteract the effect of the recession.

Linda Farish said: “The number and value of regional Time To Pay arrangements has decreased dramatically this year, reflecting the slightly more favourable post-recession business climate, and the scheme has worked well in preventing an expected spike in corporate insolvency numbers which typically follows the end of a recession.

“However, there is still great concern about the number of ‘zombie’ businesses within the Time to Pay scheme - firms that are only able to service debt but not fund expansion – and more importantly, the new figures do not show the number of businesses asking for ‘repeat’ or ‘renegotiated’ arrangements.

“If a company asks for more than one Time to Pay agreement, or a further extension on their agreed repayment plan, this could indicate their financial difficulties may be extremely serious.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .