• Businesses are increasingly struggling to find the cash to fund tax payments
• £100million more in arrears than the previous year
UK businesses currently now owe £2.6billion to HMRC in overdue VAT as many continue to struggle to find the cash to meet their VAT bills, according to LDF, a leading finance provider.
LDF says that in just one year, the amount owed to HMRC in overdue VAT has increased by £100million, up from £2.5 billion in the previous year.
VAT bills are issued on a quarterly basis and are calculated on the amounts billed on a company’s invoices, rather than the amounts it has actually received from customers over that period. This can pose a big problem for businesses that are still waiting for payments on which hefty VAT bills are due.
Peter Alderson, Managing Director of LDF says:
“The increase in VAT to 20% has been a real tipping point. More and more businesses are facing VAT bills with trepidation.
“The recession saw many fall behind with their VAT payments and the recent economic upturn has done little to ease the burden. Some are still dealing with a backlog of unpaid VAT and other tax bills whilst scrambling to source funding for upcoming tax bills.
“The situation won’t improve quickly unless customers start paying faster. Late paying customers cause huge cash flow problems even for successful and fast growing businesses.
“Previously businesses could rely on borrowing from the bank to fill the gap, but since the recession this has become increasingly difficult to find. This has left many businesses, especially smaller ones, in real difficulty.”
LDF says that VAT bills aren’t the only financial burden facing businesses – the looming July 31st tax deadline for sole traders and partners is also causing a headache for many. Businesses have to find the cash to cover half of their estimated annual tax liability on their profits in advance, based on their previous year’s revenue.
Peter Alderson says: “The upcoming tax deadline for sole traders and partners is piling on the pressure. These days, businesses are determined to pay on time whatever the difficulty, because costs spiral so quickly when HMRC starts imposing fines and interest charges on overdue bills.”
According to LDF, a growing number of businesses are turning to finance solutions as a way to ensure they can cover their upcoming tax liabilities, helping to smooth out their unpredictable cash flow.
LDF’s VAT funding facility allows businesses to borrow money on a quarterly basis, repaying it in three equal instalments over the quarter.
Peter Alderson adds: “We understand the burden facing businesses when paying their VAT bills; so we offer funding to give peace of mind over their finances. Offering businesses flexibility and the opportunity to regain control over their tax flow, the spread payments facility should help businesses in planning effectively for the future.”