A recent study by Premium Credit reveals that over 550,000 small and medium-sized enterprises (SMEs) are facing difficulties in settling their tax bills, with Corporation Tax and VAT being the major concerns.
The research by Premium Credit, a foremost finance provider for corporate tax bills, highlighted that one in ten of the UK’s 5.5 million SMEs are grappling with tax dues. Additionally, 15% have encountered issues paying them over the past decade. The typical bill they found challenging to pay averaged £45,600. However, a notable 10% encountered difficulties with bills exceeding £100,000.
Factors exacerbating the tax payment challenges include the escalating cost of living, which has added strain to almost a fifth (19%) of SMEs. A significant 26% believe they’ll face difficulties settling one or more tax bills in the forthcoming five years.
Breaking down the tax concerns, Corporation Tax is the primary culprit, with 54% of those experiencing tax payment challenges attributing their problems to it. Meanwhile, 35% identified VAT as their pain point.
In response to these challenges, Premium Credit’s Tax and VAT funding solution experienced significant growth last year. This scheme enables businesses to distribute their tax payment burdens over a year. Specifically, there was a 68% surge in the amount loaned to cover VAT bills and a 53% uptick for non-VAT bills.
Jennie Hill, chief commercial officer at Premium Credit (Specialist Lending), said: “The current cost of living crisis undeniably strains SME finances, impacting their capacity to fulfill tax obligations. However, tax payment challenges are a perennial issue for businesses.” Hill emphasised the penalties associated with delayed tax payments, suggesting that businesses should consider options like Premium Credit’s solution to improve cash flow and timely bill settlements.
Additionally, the research unveiled potential consequences for businesses struggling with their bills. Nearly a quarter (24%) might resort to staff layoffs, 30% may seek additional funding from current investors, and 26% could scout for new investors. Around 29% are considering a payment agreement with HMRC, while 21% might turn to personal loans from relatives or friends.
