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Increase in Time to Pay rejections

There was an increase last year in the number of requests to defer business tax payments under the Time to Pay scheme that were refused by HM Revenue and Customs.

New figures have revealed that HM Revenue and Customs (HMRC) turned down 5.8 per cent of all applications from firms struggling with cash flow problems to reschedule their VAT, PAYE and corporation tax payments.

In 2009, the refusal rate was 2.7 per cent.

Time to Pay agreements allow businesses that are finding it difficult to manage their tax liabilities, as a result of the economic downturn, to arrange a new tax payment timetable with HMRC.

In 2010, HMRC agreed 138,700 deferrals worth £2.34 billion. Since the Time to Pay scheme was first launched in November 2008, at the height of the recession, some 395,400 tax bills have been deferred.

Up to the end of last year, £5.87 billion of the taxes affected by late-payment agreements had been collected. HMRC has said it expects to retrieve 90 per cent of all the outstanding tax debts.

HMRC pointed out that there had been a 60 per cent drop in the number of firms applying for deferments in December 2010 compared with March 2009 when requests hit their peak.

There have been concerns that HMRC is winding down the scheme.

But a spokesman for the tax authority said: "Time to Pay continues to be available to help companies address short term cash flow difficulties that result in an inability to pay their tax in full and on time. HMRC's criteria for agreeing arrangements have not changed in any way."

It is, however, thought that HMRC is looking more closely at applications from businesses that have asked for a tax payment delay on more than one occasion in order to make sure that the requirement is temporary and not the result of a deeper problem.