Unpaid VAT bills totalling £2.6 billion owned by UK businesses
The UK’s small businesses owe billions of pounds in unpaid VAT bills as tax deadlines loom, new research has revealed.
According to Funding Options, nearly £2.6 billion is owed in overdue VAT – a figure that has remained high for several years.
While £2.55 billion was owed in 2014/2015, that figure has increased to £2.59 billion in 2015/2016, suggesting many businesses remain unaware of how to overcome their issues.
One of the major factors behind the high levels of overdue VAT owed to HMRC relates to cash flow problems resulting from the late payment for goods and services.
With VAT paid based on what is billed to clients, rather than a business’ revenues, it means that firms who are owed money may not have the finances to cover what they need to pay.
Not only is pressure placed on their cashflow, but those who fail to pay VAT could also be faced with further consequences – HMRC has the power to enforce late payment penalties or to send debt collectors to a premises to seize assets.
Businesses faced with such options should consider HMRC time to pay services in order to get confidential support and advice on how best to resolve the situation.
One issue for a business is that VAT still needs to be paid, even when a client does pay late – given that the cashflow of smaller firms tends to be more unstable, it can hit them harder financially than larger firms.
Many businesses will look to carefully manage their cashflow and may deliberately delay payments to later point in time when more capital is available.
Alternative finance options are available to assist those struggling with debt and late payments when they have bills to pay themselves.
This reduces the risks associated with being forced to pay VAT bills late, as it gives businesses the capital needed to continue trading and to manage their operations more effectively.
The research also suggests the fallout from Brexit may cause further issues for SMEs, given the fluctuation being noted between sterling and other leading currencies.
By Phil Smith