Sharp decline in Time to Pay arrangements

Amount granted under tax deferral scheme shrank from £390m in January to just £140m in September

Breathing room: Some 371,200 arrangements were granted under the TTP scheme between November 2008 and September 2010

The number of Time to Pay (TTP) arrangements granted by HMRC has shrunk dramatically this year, suggesting that fewer firms are struggling to pay their taxes as the economy returns to growth.

TTP was launched in November 2008 to give breathing room to firms – not least those in the channel – hit by the recession.

According to official statistics released today, some 371,200 arrangements were granted under the scheme between its introduction and September 2010. These arrangements were worth £6.38bn, £5.41bn of which has already been paid back.

HMRC rejected only five per cent of requests.

The majority of arrangements (226,100) were valued at less than £10,000, with 137,500 worth between £10,000 and £100,000 and just 7,620 worth more than £100,000. Nearly half (46 per cent) of all the arrangements were for VAT, with the remainder split roughly evenly across PAYE, CT and ITSA.

The data shows a steep decline in the total amount paid under the scheme per month since the peak of £670m in January 2009. The figure has shrunk consistently in 2010, from £390m in January to £140m in September.

R3, a trade body for insolvency professionals, said TTP had “worked well” in preventing an expected spike in corporate insolvencies which typically follows the end of a recession.

However, it pointed out that HMRC’s figures did not reveal the number of firms asking for repeat arrangements.

“We understand that the number of repeated deferrals increased considerably from around 33,000 in September 2009 to 79,000 by early 2010,” it stated. “Without new figures, it is impossible to tell how many companies under the TTP banner are severely distressed and at risk of insolvency.”