Rover suppliers could defer VAT payments

SUPPLIERS to MG Rover may be able to defer VAT payments under plans unveiled by the task force set up to deal with the fallout from the company's demise.

The Inland Revenue has agreed to defer up to £120m of bad debt owed by the car maker and its engine-making business Powertrain.

The MG Rover Task Force said the deal would be worth up to £20m of cashflow in the short-term, a huge boost for many of the small, local firms that derived the majority of their income from Rover.

Companies have been forced to lay off hundreds of workers as they struggle to cope with the loss of revenue following Rover's collapse. Talks have already begun with relevant supply chain companies about deferring their VAT, PAYE and National Insurance payments.

Advantage West Midlands and MG Rover Task Force chairman Nick Paul said: 'When MG Rover collapsed, many in the supply chain were still owed money by the company, totalling £120m.Normally they would have to have waited six months to receive the VAT - about £20m - they are owed and would have got it eventually.

'In effect, it's a double whammy. Their cashflow is suffering because they haven't been paid. Then they face having to pay VAT on payments they haven't received. They are therefore out of pocket even more.'

Each agreement will be made on a case-by-case basis and could last for three months or more.Paul said the deferment meant companies would not have to pay out money on debts that have not been recovered, and gives them 'breathing space' while they re-organise their business.

Attempts were also being made to recover stock lying on pallets at the MG Rover plant at Longbridge.