Written ByKeith Steven
Managing Director
Keith is the Managing Director of KSA Group Insolvency Practitioners which has been established for 25 years. The company has undertaken more CVA led rescues than any other firm. Read our case studies to see how.
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 with HMRC over TTP is that you can pay back the debt over a longer period ( upto 5 years). 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.
Bear in mind that now that HMRC are secondary preferential creditors they will need to be paid 100p in the £1 in the CVA. The unsecured creditors, if you have any, are likely to get back anything between 5p and 100p depending on the affordability.
| Formal Time to Pay Agreement ( Plan A ) | Company Voluntary Arrangement | |
| The debt needs to be paid in full 100p in the £1 | Up to 90% of some debts (i.e not HMRC) 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 – may 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. |
A company voluntary arrangement can also allow the company to reduce its costs by exiting leases and making redundancies at no cost.
Advice If You Are A Creditor Of A Company Proposing A CVA
Advice If You Are A Creditor Of A Company Proposing A CVA