My business is under stress and HMRC have offered to allow the company to pay its PAYE and VAT liability over one year. Why should I go for a CVA?
The answer is that you should do what ever is best for your business! The main advantage of a CVA over TTP is that you can write off a proportion of the debt whereas a TTP you have to pay all of the debt. It all boils down to affordability. Can your business afford the payments need to meet a time to pay agreement. If the answer is yes then great! - Pay off all the debt and then got on with making money. But if the company is insolvent then it is likely that a too ambitious Time to Pay programme will result in insolvency with a CVA really being the only option to continue trading. We can advise on both a formal Time to Pay proposal to the HMRC or a company voluntary arrangement. Both courses of action will need detailed forecasting of the businesses cashflow and extensive liaison with the creditors in question. The threat of proposing a CVA can be used as the "sword of Damocles" to push through a Time to Pay as in the event of formal insolvency the return to creditors is likely to be less. So what are the main differences
Formal Time to Pay Agreement ( Plan A ) |
| Company Voluntary Arrangement |
The debt needs to be paid in full 100p in the £1 | Upto 70% of the debts can be written off | |
Will need to be paid over 6 months to 1 year | Debt can be paid over 3-5 years | |
No formal appointment of insolvency practitioners | A formal appointment as supervisor of a CVA all creditors informed. Less public than administration though | |
No effect on credit rating | No credit rating - will need a hive down to tender for government contracts. | |
Cheaper and quicker to instigate | Formal appointment so higher costs. 20% more expensive as a rough guide | |
More immediate pressure on cashflow due to shorter time scale | A longer period allowed to make payments | |
No regulatory issues with being in a formal insolvency event | Regulations can be an issue but can normally be worked around with hive downs and negotiation. | |
Categories: CVA, What is a CVA or Company voluntary arrangement?, HMRC Time to Pay Arrangement for VAT and PAYE
The Ultimate Guide For Worried Directors
Worried about poor cashflow? How to win new work? How to pay wages on pay day? For expert advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539