UK businesses are to receive financial assistance from a new business growth fund set up by six of the major British banks.

Companies whose average turnover is between 10 and 100 million pounds will be able to get equity support from the fund in one of a number of initiatives announced by the bank taskforce last week. Qualifying businesses could receive equity of £2m to £10 from the scheme.

Over the next few years, the taskforce, which comprises Barclays, Standard Chartered, HSBC, Santander, Lloyds and the Royal Bank of Scotland plan to build up a 1.5 billion pound investment portfolio.

However, Bibby Financial Services thinks that small businesses and freelancers have been overlooked by the proposals. Bibby’s chief executive, Edward Rimmer, points out that many small businesses will not have the high turnover figure necessary to qualify for this financial aid and the banks do not appear to have proposed any measures to help them.

He also questions whether businesses that do qualify will in reality want to hand over ownership of their company to the taskforce at a time when trust in the banks is low.

SMEs are the lifeblood of the UK economy and the government appears to be missing the point and targeting the upper end of the spectrum instead of helping the newer, smaller businesses, he added.

Another expert, Michael Baxter, the editor of the online magazine Investment and Business News, agrees that the principle behind the idea is a good but he thinks that the fund might not be big enough. He would like to see the Bank of England put some of the money it has earmarked for the quantitative easing programme into a similar scheme.

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The FSB is amongst groups lobbying parliament not to end the current tax deferral scheme. It is feared that closure of the scheme might lead to thousands of SMEs, including limited company contractors, filing for bankruptcy.

The time-to-pay scheme has been an enormous help to small businesses and online accountants during the economic downturn and 66% of business owners would like to see it either retained or increased.

Recently there has been an increase in complaints against HMRC who seem to have become reluctant to let SMEs take advantage of the scheme. The revenue doubled the number of applications that were rejected in the first quarter of 2010 to 11%. In 2009 the figure was just 5.3%.

Although HMRC insists it has not taken a harder stance, and that every request is considered on its own merits, business representatives are concerned.

200,000 businesses still say they need time-to-pay and up to 20,000 of these may fold if the scheme is withdrawn.

One of the partners at MCR Tax Arrears Solutions has warned that we are likely to see a rise in insolvencies as HMRC is already owed £30 billion from businesses who have taken advantage of the scheme.

Since the scheme was implemented, 310,000 time-to-pay requests have been granted. The total amount deferred is nearly £5.3bn.

HMRC recently said that any company that wished to defer more than a million pounds would be required to submit an independent business review.

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The FSB hopes that the next government will make it harder for HM Revenue and Customs to shut down SMEs; a move that will no doubt delight limited company contractors and sole traders.

John Walker, the chairman of the Federation of Small Businesses said that the new government should look for ways to help small enterprises stay in business.

He thinks there are various ways to achieve this such as making HMRC show leniency towards SMEs who make late tax payments and providing better access to credit and affordable finance.

There are currently more than 160,000 businesses facing critical financial difficulties according to the latest Red Flag report from Begbies Traynor. The rescue recovery specialist recently carried out a study and discovered that these businesses owe more than £55 billion to their creditors and suppliers.

As well as providing a more flexible approach in it’s treatment of SMEs, contractors will no doubt be hoping that the next government will undertake an immediate and comprehensive review of the UK tax system, with a particular emphasis on IR35 and Family Business Tax.

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As from the 6th April, any business that hopes to avail the ‘time to pay’ scheme and defer a tax payment of over £1m, has to pay for an Independent Business Review (IBR) that will cost an average of £42,500.

HMRC has admitted that an IBR could be as costly as £75,000, which seems a lot for a company that is already struggling with their cash flow.

The ‘time to pay’ scheme was introduced as a measure to help businesses defer tax during the recession and was extended for a further 5 years in the last budget. Since its conception, £5bn has so far been deferred and many contractor accountants have already voiced their approval of the scheme.

The Independent Business Review is designed to help HMRC decide whether a company should qualify under the ‘time to pay’ scheme. HMRC hopes that by introducing this measure, companies that do not really need to defer their tax will be deterred from applying. The review is conducted by insolvency professionals and it is expected that around 250 businesses a year will need to provide one.

Amongst the items that can be included in an IBR are the annual and management accounts, cash flow forecasts, aged debtor and creditor lists, future trading projections and a detailed fixed assets register.

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New figures reveal that the Business Payment Support Service has helped more than 160,000 businesses reach agreement with HMRC over payment of outstanding taxes.

These agreements are worth £5.13 billion to HM Revenue and Customs. Contractors who work as sole traders or limited companies could be among the beneficiaries of the Time to Pay scheme and many leading contractor accountants have already given it the thumbs up.

A total of 300,000 arrangements have been set up in the 15 months since the BPSS was set up, an average of more than 4,500 per week.

These figures show whilst many people have been struggling to pay their taxes, help is at hand and if you wish to avoid unnecessary penalties, vital assistance is at hand.

Although some advisers and online accountants believe that the scheme is getting harder to join and that it will close eventually, HMRC insists that it is still available and the criteria for eligibility have not been amended.

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