Accountants and financial advisers have warned of a sharp rise in clients struggling to pay their tax bills, with the average unpaid bill standing at £120,000, according to research from Premium Credit.
The study found that almost all (94%) accountants and advisers who provide tax advice have seen more clients fall behind on payments in the past 12 months.
More than six in 10 (61%) reported at least a 10% rise in the number of clients unable to settle their tax bills.
Income tax accounted for the biggest increase, with 70% of advisers reporting more clients unable to pay.
A further 40% had seen difficulties linked to VAT payments, while 39% cited rising problems with corporation tax.
On average, advisers said around 13% of their clients are now struggling with tax arrears.
When asked about the causes, half of accountants and advisers pointed to tax rises and planned future increases, while 43% said clients’ profit margins had been hit.
Last year’s survey showed cost of living pressures were the most common reason, but this year only 30% of respondents ranked them as a top three factor.
The research also suggested growing reliance on HMRC’s Time to Pay (TTP) scheme, which allows businesses to spread arrears over three to six months.
Currently, only 25% of accountants and advisers said that at least 5% of their clients use TTP.
But within three years, nearly two-thirds (63%) expected that proportion of clients to be enrolled in the scheme.
Concerns are also mounting over HMRC enforcement.
More than four in five respondents (81%) expected an increase in the number of clients facing bailiff action for unpaid corporation tax in the next five years, with almost one in five (19%) predicting a dramatic rise.
The research found overwhelming support for solutions that would allow clients to spread their tax bills, even among those not currently in arrears.
Some 94% of accountants and advisers said they believed clients would consider such services if they were available for a small fee.
Jennie Hill (pictured), chief commercial officer at Premium Credit (Specialist Finance), said: “Almost all the accountants and financial advisers in our research are seeing an increase in clients struggling with tax bills and the average bill is substantial.
“Accountants and financial advisers need to engage with clients facing tax problems and offer them practical solutions such as spreading the cost into convenient monthly payments.”
