The PBR and all that ...

11th December 2009
I took the time out on Wednesday to watch and listen to the Pre-Budget Report ("PBR") being delivered by Alastair Darling (the Internet makes all this so easy!). I am not interested by all the political manoeuvring, but there can be no doubt that the whole exercise was very lame and dsiappointing for good reason - the impending election.

Much comment before and since expected to see more being done to raise the tax take and attack some of the obvious areas such as Capital Gains Tax and VAT - but nothing. It has to come, but presumably now after we have had a general election. A poison chalice if ever there was one for any incoming Government.

One area that has received a lot of comment over the past year is the HMRC Business Payment Support Service ("BPSS") which we have commented on previously here and there is more information about on our website. This was introduced in last years PBR and has without a doubt been the most "successful" Government initiative to date to support businesses through these troubled times. There was some speculation that it might be closed at the end of December 2009, but the Chancellor confirmed on Wednesday that it will remain in operation as long as it is needed - which repeats his pledge of a year ago.

The BPSS has apparently now assisted over 160,000 businesses and deferred £4bn in tax payments. A good proportion of these business have used the service more than once.

Some commentators, including our good friend and colleague Keith Steven have suggested that all the BPSS is doing is putting of the inevitable. Many very fragile businesses that might (and should??) have otherwise failed have been propped up by this facility and when the prop is taken away they will then fail.

Our view is a bit different. We have used the facility very successfully over the past year with many client businesses and in some cases it has been the very difference between failure and being able to continue trading. Most of these same businesses are now finding cash flow a little easier, so it did have a positive impact. However, undoubtedly there are other cases where either the system has been abused or it is just putting off the inevitable.

At Insight Associates we do therefore very much welcome the decision to continue this facility for as long as it is needed as we feel sure it will help many businesses into 2010 - a time which may prove even more difficult for many. We are far from out of the difficult times yet.

Businesses using the BPSS must though be careful. It seems like easy money, but it is just buying time and careful planning and cash management is required. Ensure you can afford the commitment you are making as HMRC are getting increasingly tough on non-payers and are not shy of issuing Winding Up Petitions.

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