A Company Voluntary Arrangement CVA or a Formal Time to Pay Agreement

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 needed to meet a time to pay agreement? If the answer is yes then great! - Pay off all the debt and then get 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		Up to 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.