This will allow members of a practice unable to pay their tax bills due to cash-flow problems facing their firm, to arrange a joint time-to-pay agreement with the tax authorities. "This development is a major breakthrough for any sizeable practice which might be feeling pressure on cash flow in the current climate," said Richard Mannion, national tax director at Smith & Williamson. "Inevitably, problems and inconsistencies occurred when there were say, 50, 100 or more individual partners, typically spread over different offices each trying to draw up their own arrangement with their local tax inspector. The old system just didn't work." The BPSS largely overlooked the needs of larger partnerships where the companies' taxable profits are all allocated to the individual partners. This meant the partnership itself had no income tax liability and HMRC’s systems operated on the premise that each individual partner should make a separate time to pay application. The partners must be able to demonstrate they are unable to pay their individual liability in full but that it can be repaid within 12 months, Smith & Williamson added.  

Written by David Jetuah
Accountancy Age, 05 Jan 2010