UK businesses owe £2.6bn worth of VAT
27 October 2015
New research has shown that UK businesses owe £2.58 billion in VAT payments to HM Revenue & Customs (HMRC).
This debt is due to clients not paying their bills on time, according to research from finance firm LDF. It discovered that one of the most significant reasons for late payments is that small and medium-sized enterprises are finding it difficult to collect cash from customers, leaving them unable to pay what they owe to HMRC.
The Managing Director of LDF noted that tax should not start to compete with plans for investment and that businesses need to plan ahead to make sure they know how they are going to cover their upcoming tax liabilities. This will allow them to “ring-fence” the funds they use for growth. He said that the growing economy means that businesses should be able to make significant investments in staff and equipment, but, late payment can make this difficult for a lot of SMEs.
The total owed to HMRC has risen slightly over the past year, going from £2.55bn in 2014 to £2.58bn in 2015. Early in September, the government announced it would shake up the rules to tackle the issue of late payments to suppliers. Businesses are increasingly choosing to make VAT payments monthly rather than in four quarterly lump sums to reduce the impact on cash flow.
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