UK firms owe £1.8 billion in late Corporation Tax

6 January 2017

UK firms owe £1.8 billion in late Corporation TaxThe total value of Corporation Tax payments in arrears has jumped 15% in the past year and experts are warning that this could rise further.

The total value of Corporation Tax payments in arrears has gone up from £1.59bn to £1.82bn according to Funding Options. And it is warning that for businesses unable to pay their Corporation Tax on time, HMRC is using increasingly aggressive methods to recover overdue tax. Among the Revenue's sanctions are late payment penalties, sending debt collectors to premises and asset seizures.

Small businesses are at particular risk of falling into arrears because of volatile cash flow. Funding Options reveals that smaller companies, who would typically rely on bank overdrafts to bridge shortfalls, have had those overdrafts cut by £5 billion - 37% of the total - over the past five years, affecting their ability to pay their tax bills on time.

It means SMEs are increasingly using alternative finance, including peer-to-peer lending, invoice finance and crowd-funding, to avoid a crunch point in their cash flow when paying tax bills.

"We have seen an increasing number of companies come to us for funding in order to pay their overdue tax bills," said Conrad Ford, ceo of Funding Options.

"These figures demonstrate the growing pressure on cash flow for companies… [and this] could get worse following the outcome of the EU referendum. Businesses need to make sure they have adequate funding to pay tax bills on time, without taking capital from other areas of the business."

The Government has introduced the Bank Referral Scheme to make it easier for small businesses to find funding. Under the scheme, banks that turn down loan applications are required to offer small businesses a referral to three designated finance platforms. Funding Options is part of this scheme.