Outstanding VAT soars as businesses struggle to make payments
HM Revenue & Customs (HMRC) is owed £3bn in outstanding VAT – a five-year high.
For the year up to March 2018, the amount of VAT owed by UK businesses rose by 22% from the £2.48bn outstanding in the previous period, according to new research.
Overdue corporation tax bills also rose to £1.98bn for the year to March 2018, a 5% increase from the previous period.
Failing to pay VAT and corporation tax can result in serious sanctions including director disqualifications, asset seizures and winding up petitions.
Therefore, it’s vital that businesses do all they can to keep on top of their tax commitments and avoid being pursued by HMRC.
Why are businesses struggling to pay their taxes?
There are numerous reasons why a business might struggle to meet its tax commitments.
Economic uncertainty, late payment and rising business costs are just a few of the pressures that could impact a business’s ability to pay.
Even the most financially savvy, who plan ahead and put money aside throughout the year to be able to pay HMRC, could find themselves unable to pay if they experience an unexpected cash flow shortage through late payment or an unusually high bill.
What can businesses do?
If your business is struggling to pay its tax bills, securing external funding could help to release the cash required to pay VAT.
The funding market has evolved considerably in recent years and there are now numerous options available which could help in situations such as these.
In order to find the ideal solution for your business you must first pinpoint the issues that caused you to be unable to meet your commitments in the first place.
Whether it was a result of late payment or a large business expense, this information could be the key to unlocking a finance facility which ticks all the right boxes and supports your business going forward so that you don’t find yourself in the same situation again.
Also, you may benefit from using HMRC’s Cash Accounting Scheme.
Usually, the amount of VAT you pay HMRC is the difference between your sales invoices and purchase invoices.
You have to report these figures and pay any money to HMRC, even if the invoices haven’t been paid.
But, with the Cash Accounting Scheme you only pay VAT on sales when your customers pay you.
To join the scheme your VAT taxable turnover must be £1.35 million or less.
If your business is struggling to pay its tax bills we could help. Contact our team on 0800 9774833 or request a call back to discuss your requirements with one of our expert funding consultants.