Finance Monthly - December 2021

27 Finance Monthly. Bus i ne s s & Economy 864,000 (2019/20: 648,000) TTP arrangements, an increase of 33.3% from the tax year 2020/21. This increase has resulted in the quantum of debt under a TTP rising by 557% to £15.1 billion. The graph below highlights the significance of this increase when compared to the £2.78bn average debt level over the six years prior. The coronavirus pandemic has presented HMRC with the extremely difficult task of assessing businesses future trading prospects in a period of unprecedented uncertainty. Key questions such as business viability and past compliance records will be at the forefront of HMRC’s collection process. HMRC has been forced to take a much more open view on these questions, as many viable businesses have been plunged into extended periods of losses due to closures, national and regional lockdowns, along with sudden changes in consumer spending and habits. Producing reliable forecasts has become much more difficult and something that management teams must revisit frequently. In many ways, HMRC’s greatest challenge is to find a somewhat unnatural equilibrium as a collector of taxes whilst simultaneously supporting UK businesses. Ultimately HMRC will be responsible for deciding which options are best for the UK taxpayer in the orderly collection of overdue taxes while safeguarding employment and the ongoing recovery of the UK economy. The TTP scheme has been a resounding success since it was introduced in 2008/9, and it has facilitated the repayment of billions of pounds of overdue tax debts. What is clear is that the scheme is going to play a vital role in delivering the orderly repayment of overdue taxes over the next three years. HMRC’s Future Outlook The accumulation of unprecedented levels of overdue debt, debt tied up in TTP arrangements and the significant reduction in the numbers of insolvencies, puts HMRC in a difficult predicament. It is their responsibility to act in the UK Government’s best interests: to manage the levels of overdue debt whilst also ensuring enforcement action is taken against unviable businesses that are arguably trading to the detriment of UK taxpayers. Some enforcement tactics against unviable businesses are therefore unavoidable, however, HMRC has shown throughout the pandemic that it is keen to support UK businesses. HMRC’s states in its latest accounts, that it has actively ‘reviewed and altered the tone of (their) communications, with different messaging determined by whether customers had experienced a high or low COVID-19 impact as well as offering ‘more flexible payment options such as longer TTP arrangements and extended review periods’. Kroll expects this will continue to be the case and HMRC should be accommodating with businesses that submit strong proposals that warrant support and that include evidence of: • An accurate schedule of arrears reconciled to HMRC’s statement of liabilities • A summary of the background to the request, including specific impacts of COVID-19 • Mitigating actions that have been made and what future actions are being taken to ensure ongoing compliance with the TTP • A summary of the support provided by other stakeholders (lenders, suppliers, shareholders). 16 14 12 10 8 6 4 2 0 2.6 25.6 1.9 2.5 2.4 2.7 2.3 15.1 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 30% 25% 20% 15% 10% 5% 0% TTP Debt (£bn’s) TTP Debt as % Overdue Debt TTP Debt Levels TTP Debt % of Overdue Debt 2.3 1.9