End of tax scheme to prompt wave of distressed businesses for sale?

In another indication that the UK can expect to witness a selection of distressed businesses for sale towards the latter end of 2010, the government has been warned of a ticking time bomb of company closures and job losses when its "time to pay" scheme ends.

The £4.8 billion programme, which lets businesses delay their tax payments, has been credited with keeping some 160,000 firms afloat during the recession by preventing HMRC payments pushing them into liquidation or administration.

However, it's expected to be axed after a general election, leading financial experts to predict a wave of liquidations when companies are forced to pay their delayed VAT, national insurance and other tax bills.

Colin Burke, a partner at corporate rescue and recovery firm Milner Boardman, affirms that numerous businesses aided by the scheme have increased the size of their debts to the government.

"This leaves HMRC with no option but to take action to prevent further default and recover the arrears, thus triggering formal insolvency proceedings," he continues to the Independent.

Whereas such proceedings were evenly spread over a period in the past, Burke concludes, in this instance a backlog has been created which some fear will lead to "a tidal wave" of business failures.

The Treasury maintains that suggestions the "time to pay" scheme will end suddenly run counter to what it was originally set up to achieve.

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