Accountants and financial advisers have become increasingly concerned about their clients’ ability to pay important tax bills, research from Premium Credit has revealed.
The majority (98%) of accountants and financial advisers supporting clients with tax said the number struggling to pay bills has increased in the past 12 months, with 43% reporting a dramatic increase.
Corporation Tax bills were the biggest worry – 71% said they were seeing the biggest increase in clients struggling to pay, compared with 53% who reported those struggling to pay income tax.
More than half (55%) said the economy was among their top three reasons for clients struggling with tax.
A similar number (53%) cited personal reasons such as divorce, and 47% highlighted the cost-of-living crisis.
Accountants and advisers expected the issue to worsen – in 12 months they expected the average number to rise to 14%, with nearly half (47%) estimating 15% or more of clients will have tax payment problems.
The average bill clients are struggling to pay was estimated at around £100,000, although one in 10 said clients had problems paying tax bills of £200,000 or more.
Premium Credit’s Tax and VAT funding proposition, which allows companies and business owners to spread the cost of their VAT, corporation tax and self-assessment tax payments for up to a year, saw a 68% rise last year in the amount it lent to fund VAT bills and a 53% increase in the amount lent for non-VAT bills.
The majority (89%) of accountants and financial advisers believed clients would consider using a service enabling them to spread tax bill payments even if they were not struggling to pay bills.
Penalties and fines for missing tax deadlines range from £100 for being a day late with a Corporation Tax payment to as much as 15% of the amount of VAT not paid on time.
Fines for paying VAT late only start after payment is 15 days overdue.
Jennie Hill, chief commercial officer at Premium Credit (Specialist Lending), said: “Accountants and financial advisers are good judges of the health or otherwise of small businesses and they are reporting increasing distress from firms on their ability to pay their tax bills.
“With firms struggling to pay average bills of £100,000 there is a real need for solutions that can help companies to meet their obligations and continue to operate effectively.”
