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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 year.

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 winding down."

"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 working capital."

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:

Accountancy Age

Law Society Gazette

Economia