UK Businesses Owe £2.6bn in Overdue VAT
The HMRC are owed £100m more in arrears this year as UK businesses struggle to pay their taxes
UK businesses owe the HMRC £2.6bn in overdue VAT, according to figures released by specialist finance provider LDF.
The deficit has increased by £100m in comparison with last year, causing concern for UK businesses struggling to fund tax payments.
For companies with a turnover in excess of £1.35m, VAT bills are issued on a quarterly basis and calculated on a company’s invoices, not the amount that has actually been received from customers over that period. Businesses are therefore often unable to keep up with their taxes as they are still awaiting payment from customers.
This struggle to meet VAT payments could especially be an issue for small and mid-sized businesses as a recent report by the Asset Based Finance Association (ABFA) found that the average wait time for customers to pay smaller companies had increased to 71 days.
LDF’s report also highlighted the July 31 tax deadline for sole traders and partners, which will mean businesses must cover half their estimated annual tax liability on their profits in advance and based on the previous year’s revenues.
The report stated that with the delay in payments, UK businesses are being forced to look at flexible finance options to meet payments – something which finance providers need to offer.
LDF’s managing director, Peter Alderson, commented on the report:
“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.
“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.”