According to recent figures, the amount of VAT owed to HM Revenue & Customs (HMRC) by UK businesses reached a five-year high this year, adding up to £3 billion. This is a 22 per cent increase for the year to March 2018 and a significant rise on the £2.55 billion recorded for the 2013/14 tax year.
Over the same five-year period, outstanding corporation tax has increased year-on-year from a low of £1.52 billion to almost £2 billion in the last tax year for which figures are available.
According to the research, the main reason for the VAT outstanding to HMRC being so high is that small businesses are being paid very late by larger concerns, leaving them with no cash flow to pay their VAT bill.
In fact, in March this year, the Federation of Small Businesses (FSB) found that a staggering 84 per cent of small firms reported being paid late and this attributed the closure of around 50,000 small businesses.
To counteract this, the Government launched the Small Business Commissioner (SBC) in December last year in a bid to help with late payment and unfavourable payment practices.
However, according to a spokesperson for HMRC, the Revenue believes that the main reason for the increase of the value of the VAT bill is because of “an upward growth of businesses registering” for the tax.
The spokesperson added that HMRC’s Cash Accounting Scheme could make it easier for firms to pay the tax, as it allows businesses with a VAT-exclusive turnover of up to £1.35 million to account for VAT when it is actually received from customers, rather than on the basis of invoices issued.
Julian Borley, Director of VAT at Milsted Langdon, said: “These latest figures suggest that the number of businesses failing to pay their VAT bills is on the rise.
“This is problematic and businesses that are behind need to try and rectify the problem. It is important to seek specialist advice if you need help.”
For more information about how Milsted Langdon can help, please contact Julian by emailing email@example.com or calling 0117 945 2500.