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According to recent figures, the number of businesses in the North East being accepted for the Time to Pay scheme has dropped dramatically. In 2008, when the scheme was introduced by HM Revenue & Customs, 13000 businesses were accepted by HMRC to defer tax payments, which added up to £220 million. In contrast, the numbers of agreements for tax deferment in the first half of 2011 have only reached 1,520.

In 2009, the number of arrangements across the North East had fallen to 7,500, dropping even further to 4360 in 2010. Originally, the Time to Pay scheme was launched by HMRC to permit companies extra time to pay their tax liabilities, which include National Insurance, PAYE and VAT, during the 2008 recession. However, the HMRC is now much tougher, and are unlikely to approve applications from businesses whose tax affairs are not in order.

According to insolvency trade body, R3 the number of liquidations in the area have increased, which indicates the HMRC is taking a much more severer stance. A number of companies who had missed a couple of tax payments had been refused Time to Pay agreements. Linda Farish from R3 said:

“When companies contact HMRC to advise that payment will be made late, this appears to be taken as an unofficial time to pay arrangement, meaning that when official applications are made, the view is being taken that one has already been granted.”

According to a spokesman for HMRC, criteria for the scheme haven’t changed. However, HMRC will have to be sure that the arrangement is a temporary measure and not an indication of a more serious financial difficulty.

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