Two-thirds of tax owed under government replayment scheme is due within next three months

The ABI is warning that companies face a billion-pound “ticking bomb” in rolled-over taxes now due for collection.

Under a government scheme called ‘time to pay’, firms have been allowed to spread out tax payments, giving them more time to get their finances in order.

But an estimated £1.26bn is still to be collected, with around two-thirds of that due for payment within the next three months, according to an HMRC spokesman.

Trade credit insurers face exposure to struggling firms being tipped over the edge by the collection, leaving suppliers without payment and calling in their insurance.

ABI trade credit committee chairman Shaun Purrington said: “For us, that is a ticking bomb. We estimate that around £4bn worth of loans have been granted and of which maybe as much as £3bn has been repaid.

“That still leaves around £1bn of working capital that needs to be collected. We estimated that there are 200,000 businesses that have used the scheme.

“It has already been extended, so the issue is: what happens next? It could be a nice present for the next elected government.”

Purrington, also UK and Ireland regional director for Atradius, said the ABI was still lobbying the government hard to reform the insolvency measure known as pre-packs.

Under the system, failed firms can quickly hive off the remaining sound assets into a new business, often dumping unsecured creditors and leaving trade creditors to pick up the pieces.

The Insolvency Service has introduced voluntary guidance this year, asking failing firms and administrators to give more information to creditors before entering into a pre-pack.

But Purrington said the guidance is frequently ignored.

He said: “We need to see a lot more work pre-event, particularly letting unsecured creditors have a say.”