Many are cynical about the help that government is giving business in today’s straightened times. It’s understandable, but suspend your cynicism as there are two government programmes that may actually help you – the Business Payment Support Service and Trade Credit Insurance.
Businesses that are suffering cashflow problems can turn to HM Revenue & Customs to take advantage of the Business Payment Support Service.

The BPSS is simple - it aims to help businesses pay their taxes (income tax, corporation tax, VAT or national insurance) over a period of time that is reasonable in the circumstances and at minimal cost.

Reasonable means that the tax debt needs to be addressed so that it's (a) paid, and (b) doesn't increase.

There is little bureaucracy involved. Interested businesses need to call the helpline where an HMRC advisor will take information on the business's circumstances, income and expenditure, tax reference number and the period of time being asked for to pay the tax(es).

In most cases, HMRC reckon they will give a decision in around ten minutes. Complex situations or large tax bills may need referring, but a decision should still be made within four days.

The best part of the deal is that businesses using the BPSS incur no penalties, no black marks and minimal interest charges: the main rate of interest for late income tax, VAT and corporation payments is, from March 24, 2009, 2.5%. Great value compared to borrowing - if you could - from the high street banks.

All businesses contacting them will be treated equally regardless of size or the amount outstanding, but taxpayers need to understand that the BPSS is only available to new enquiries, not situations where the business has already been in contact with HMRC. If an existing arrangement is threatened by worsening cashflow, the business needs to speak to the original tax office.

There are two other points to note. Firstly, some late VAT payments give rise to a 'default surcharge', but these should be cancelled where the agreement was reached after the introduction of the BPSS last November.

Secondly, contractors and subcontractors in the construction industry will need to watch that any agreed late payments of Construction Industry Scheme tax under the BPSS facility are not counted as failures for the purposes of the annual compliance test, which could result in a potentially disastrous loss of gross payment status.

Visit the HMRC website www.hmrc.gov.uk/pbr2008/business-payment.htm or the BPSS helpline on 0845 302 1435.

Trade credit insurance

There's nothing worse than supplying goods and services only to find the buyer has gone bust; concerned businesses can counter this by insuring their commercial debts with credit insurance. The problem is that insurers are risk averse and are curtailing or removing credit insurance entirely from businesses or sectors believed to be at risk from higher claims.

However, from April 2009, the government became a player in the market with a scheme called Trade Credit Insurance that aims to restore credit insurance levels for those that have had their insurance reduced.

TCI offers cover to businesses where they already have credit insurance polices in place that cover the whole of the company's order book. TCI cover sits on top of the existing policy, runs for six months and insures the lower of the cover you had previously, an equal amount of the cover now offered by your insurer or £1 million. The minimum cover available is £20000.

Availability of TCI isn't restricted to businesses of any given size or industry, but there are criteria to be met. Existing cover must have been reduced between April 1 and December 31, 2009; cover only applies to UK trade - exports are excluded; the policy runs only for six months and cannot be extended; the insurer of the underlying policy can be changed, but the business seeking TCI cover needs to ensure that the new insurer is part of the TCI scheme; and businesses without any cover or who have had their cover removed entirely cannot take advantage of TCI.

TCI works like this: your original credit insurance cover of £100,000 is reduced to £75,000, you buy cover for the missing £25,000. If the reduced cover drops to £50,000, you'll be able to buy cover for a further £25,000. If your cover drops to 25,000, your TCI cover will drop to £50,000 and you'll get a refund. And if cover is withdrawn entirely, the policy will expire and you'll get a refund.

As for cost, credit insurance is always based on risk and TCI is no different. Insurers generally charge around 0.7% of the cover required. Under TCI, which is being offered via the three main credit insurers, the government is charging 2% and the credit insurer will add a handling fee (Euler charges £60) and there is the standard Insurance Premium Tax of 5% to pay too.

To take advantage of TCI, contact any of the insurers below. Note that they will issue the policy and will deal with any claims or disputes. The government is only the backer of the insurance.

www.atradius.co.uk/
www.cofaceuk.com/
www.eulerhermes.co.uk/en/