HMRC Cracks Down on Late Payment - How Invoice Factoring Can Help
(Links already embedded by David) New HMRC figures show a dramatic increase within the Time To Pay (TTP) refusal rate, alongside a drop in demand and ongoing issues about the way the service operates.
The percentage of TTP requests refused during the first quarter of 2011 was 9.3 %, compared with 2009 and 2010 when the refusal rate was just 2.7 and 6 % respectively.
HMRC related this trend to the present economic status and the increasing of repeat applicants. Comparing the demand for TTP in 2009 the 2011 hits around 40% while the demand hits aroun 61% in comparison towards the demand for TTP in 2010. The assumption is that decreased demand is down to reduced need. One can't help but speculate if the reduction is also because of the feeling that there will probably be no improvement for TTP therefore why not use time on something else?
HRMC claimed the the increase in refusal rate might also be because of the increasing number of repeat requests. According to one spokesperson "When a company requirements a back up arrangement, be it second, third or fourth, it's only wise to make certain that the arrangement is temporary and not rooted on a much deeper issue".
HMRC is thinking about but not however implementing on the idea of a stricter criteria even when the accountancy community is protesting against it. Earlier this year business groups provided evidence of a harder line approach by HMRC and more recently the HMRC Operating With each other e-group discussed practical restrictions on obtaining agreements arranged. HMRC resourcing is one of the challenges that many group members pointed out, particularly problems about reaching the right the individuals.
One user commented: "It seems they are swamped and also the staffing seems to be too junior to make a decision. It is pretty obvious that they lack the encounter when it comes to coping with companies.
So with TTP becoming much less and much less available to companies what alternatives are obtainable?
Whilst temporary overdraft facilities may be available to some businesses, banks are generally reluctant to offer help unless current borrowing is reduced and there is very powerful asset backing within the company. Invoice factoring might appear to be a feasible alternative by providing financing solutions ins the types of debt factoring and invoice discounting, which can provide a working capital after releasing the funding against outstanding invoices to be able to improve cash flow.
The catch about these option solutions will be the require for a long term commitment, but what if the require is only short-term like within the situation of merely clearing tax liabilities?
Most invoice factoring arrangements call for a contractual commitment of about 12 months, nevertheless more versatile funders such as the Interface Monetary Group can assist with their spot factoring product, which offers a "use it as you'll need it" facility may be the answer. This gives the companies the freedom to make use of invoice factoring when the need arises by putting a few of their outstanding invoices for sale towards the finance company with out getting into a lengthy term commitment.