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An end to the government’s tax deferral scheme could lead to thousands of small business bankruptcies.

Lobby groups are urging the government not to wind down the time-to-pay in its emergency budget this month.

Chris Gorman, spokesperson for the Forum of Private Businesses, says: ‘Time-to-pay has been a massive to help to smaller businesses through recession. [Our research] found it is easily the most popular government support scheme among our members, 66 per cent of business owners said they wanted to see it either increased or retained.

‘Any moves to abolish it would be highly questionable and we would fight them tooth and nail. Anecdotally, we appear to have seen a recent rise in complaints over HMRC’s reluctance to let small firms use time-to-pay, so it’s certainly an ongoing concern.’

Stephen Alambritis, chief spokesperson at the Federation of Small Businesses, is urging the government to consider a phased reduction. He says: ‘Some 200,000 businesses have signalled that they still require time-to-pay, and of these 10 per cent may be unable to carry on if the scheme were withdrawn.’

Steve Clancy, partner at MCR Tax Arrears Solutions, warns insolvencies are set to rise, as HMRC is now owed a total £30 billion from businesses using the scheme.

Clancy fears that business insolvencies, which have been in decline, will start increasing as soon as the end of this year.

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