UK businesses currently now owe £2.6 billion to HMRC in overdue VAT as many continue to struggle to find the cash to meet their VAT bills.
Research shows 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, LDF’s Managing Director 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.”
During the early days of the credit crunch HMRC allowed businesses to defer VAT payments through its Time To Pay scheme, although the scheme has fallen out of use since 2011.
LDF’s VAT funding facility allows businesses to borrow money on a quarterly basis, repaying it in three equal instalments over the quarter and helping to smooth out unpredictable cash flow.
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.