More stringent Approach from HMRC Sets more Organizations at Risk – Can Invoice Finance Help?
With insolvency experts forecasting an increase in company failures, evidence is emerging that HMRC is implementing a harder line on outstanding debts and voluntary agreements.
Baker Tilly has cautioned the Institute of Credit Management conference in London last week that with the indicators pointing towards more companies in danger, the number of firms looking for company voluntary arrangements would boost in the coming months.
A CVA is like a legal ‘time to pay’ arrangement to provide the business a breathing space. Banks tend to like them given that they should end up with a better return for creditors. It’s a means of saving the organization, not penalizing the directors like invoice financing.
Previously, HMRC looked to be a great supporter of CVAs. This is not the case currently, on the other hand, as the department has been rejecting proposals left and right.
The reason for this is that HMRC is now favoring those that maximise early repayment contributions and not any longer proposals that seem to be to promise a realistic repayment timetable because of lower early repayments.
Furthermore, the tax department is planning to outsource collection, so it is expected to get tougher and it also has a tighter stance on Time to Pay arrangements and CVA’s.
What does this mean for the invoice financing business? Well, the best that a company can get is to utilize invoice financing options such as invoice factoring and invoice discounting in getting financial resources before the HMRC becomes strict in its stipulations. Spot factoring as well as single invoice financing, conversely, can be utilised on a per need basis without getting stuck on long term invoice discounting agreements where tax liabilities can be dealt with without long term contracts.
