Firms owe record high £1.89bn in Corporation Tax and further £2.5bn in VAT
UK businesses currently owe HMRC £4.37 billion in overdue corporation tax and VAT as many struggle to find the cash to pay their tax bills, says Funding Options, the online business finance supermarket.
The total value of corporation tax in arrears hit a record high £1.89 billion in 2016/17 – rising from £1.82 billion in 2015/16 – with a further £2.48 billion in overdue VAT payments.
Funding Options explains that late payments by clients remains a major factor disrupting cashflow – often leaving companies unable to meet tax liabilities. Late payments are a persistent problem for many, despite numerous Government moves to try to reduce payment delays.
For example, recent research by Funding Options found that in the construction sector, companies are now having to wait an average 69 days to get paid – an 8 per cent increase on the previous year.
VAT bills may have to be paid to HMRC before companies receive payment from their customers. This is because most businesses have to pay VAT bills quarterly based on the amounts charged on their invoices over that period, rather than the amounts they have received.
If a business pays its tax bills late, HMRC can impose a range of penalties, including director disqualifications, asset seizures, and even winding-up petitions.
Funding Options says the figures suggest that many companies are facing challenges funding the payments from working capital or accessing bank lending to meet their tax liabilities on time.