29th January 2013
Businesses requesting funding for January 31 tax deadline jump 60% in a year
Requests from businesses for funding to pay tax bills have
increased by nearly 60% over the last year says Syscap, a leading
independent finance provider.
Syscap says that so far this year it has received 480 requests
for funding from businesses to help pay the critical January 31 tax
payment, up from 300 requests they received in the previous
On January 31 all unincorporated businesses from sole traders
through to large partnerships will have to make a payment on
account of half of their previous year's tax bill*.
Syscap says that this year it has seen a higher proportion of
requests for loans below £1m as the need for funding amongst small
and medium sized businesses continues to grow.
As well as paying the January 31 tax bill, which is related to
the company's profits, businesses will also have to pay a big VAT
bill by February 7th (for VAT due for the fourth quarter of 2012) -
creating a huge additional burden on cash resources.
Says Philip White, CEO, of Syscap: "HMRC is under a lot of
pressure to get the tax that they are owed in as quickly as
possible. That means they have to put a lot of pressure on all
businesses to pay their tax bill as quickly as possible."
"At the start of the recession, businesses were able to use the
HMRC's "Time to Pay" process to defer tax payments that they
couldn't pay out of cash. Unfortunately that scheme has been
"Even hugely profitable businesses can find themselves short of
cash - especially if customers are slow to pay. The result is we
are seeing an ever increasing demand from businesses for a simple
funding product to cover tax payments and protect precious cash and
If a business does not pay its tax bill on time HMRC can impose
fines, interest charges and either seize the businesses' assets to
pay the tax bill, or in extreme cases, have the business shut down.
For example, HMRC shut down Rangers FC in their pursuit of an
unpaid tax bill.
Recent research by Syscap found that HMRC had used its powers of
distraint against businesses 10,577 times in the year ending March
2012, an increase of 92% on the 5,520 uses of distraint against
businesses in the year to the end of March 2011 (distraint is the
process that enables HMRC to seize assets from a business to cover
unpaid tax bills).
Explains Philip White: "HMRC is collecting tax on behalf of all
taxpayers so they don't want to allow unpaid tax bills to stack up
- it's clearly a very unsatisfactory situation if otherwise healthy
businesses get into difficulties just because they have
unpredictable cash flows."
See the coverage in:
Law Society Gazette