Surge in corporate insolvencies on the horizon?

Aspiring entrepreneurs take note: Britain faces a surge in corporate insolvencies as businesses' "time to pay" arrangements with HM Revenue & Customs (HMRC) begin to expire, the trade association for insolvency practitioners has claimed.

R3 says more than 200,000 companies signed up to the programme when it was introduced in last year's pre-Budget report, delaying payments totalling around £3.6 billion.

Governing national insurance contributions, VAT, corporation tax and other levies on firms, the initiative was designed to cut some slack for organisations feeling the brunt of the recession.

The deal was keenly taken up by small-business owners such as those buying pubs or coffee shops, which have particularly suffered due to taxation in recent years.

R3's president, Peter Sargent, says the trade body is expecting to see nearly 30,000 corporate insolvencies this year, up from 23,000 in 2008.

"Company directors must plan for the time when the deferral ends and make sure that they can pay the final bill," he states.

"Those that don't run a serious risk of adding to what we fear will be a glut of failures when the time-to-pay concession runs out and the recession continues."

R3 reckons a unique factor in the current recession is HMRC's "lenient stance" on business debt, with the provision of "extended breathing space" for firms to sort out their cash flow problems.