Scrapping HM Revenue & Customs' 'Time to Pay' scheme in next week's Budget could force thousands of small firms struggling to manage tax payments into administration, the Forum of Private Business is warning.
The 'Business Payment Support Scheme' was launched in 2008 to allow small businesses hit by the recession to defer tax payments to HMRC. It has so far helped more than 200,000 businesses ease their cash flow problems by allowing them to defer over £5 billion in tax payments.
In a poll last year the scheme was voted the most popular of all the Government's business support programmes. According to the Forum's latest Economy Watch survey, almost 60% of business owners believe HMRC has been supportive in recent months.
This is despite 28% saying that levels of taxation are too steep, 19% reporting that they struggled to speak directly to a HMRC representative and others complaining of problems with making online payments and a lack of payment flexibility.
In all, only 3% of business owners surveyed said they have experienced difficulties in accessing the scheme and just 1% said that HMRC's advice has been inconsistent.
The scheme was extended for a further four years by the previous administration, but recent reports suggest it could be being wound down as part of public spending cull to reduce the hole in the UK's finances. Reducing the deficit was seen as a top priority by the majority of small businesses polled by the Forum in an earlier survey.
Almost a quarter (24%) of respondents to Economy Watch note a recent increase in their tax burden. Further information from a range of organisations, including accountants and finance specialists, suggest that the rate of approved applications under the scheme is shrinking, particularly for firms owing larger sums of money, and that businesses are being given less time to defer payments.
However, despite the UK limping out of recession the need for the support service remains widespread. Out of businesses requiring support in the near future, 38% anticipate needing help to meet their tax payments.
"The Business Payment Support Scheme remains a real lifeline for many small firms struggling with cash flow and this will be the case for a while. Now is not the time for it to go," said the Forum's Head of Campaigns Jane Bennett. "Re-balancing the economy is clearly a major priority but sacrificing genuine support like this will only jeopardise small businesses and hinder sustained recovery. The message is clear - it is important to preserve 'time to pay' and other viable small business support schemes in the Budget."
Tuesday's Budget is expected to herald a range of measures on tax and public spending to tackle the record deficit, sparking fears among small businesses that they could suffer.
The Small Business Minister, Mark Prisk, has already hinted at plans for the Government's business support structure, including possibly axing regional Business Link offices, which cost £190 million per year to run, and making changes to the Enterprise Finance Guarantee (EFG) scheme, a government guarantee for bank lending to small businesses introduced under the previous administration.