HMRC seizes assets from over 1,000 small businesses in last year
– Finding funding crucial for SMEs struggling as tax deadline nears
HMRC used its power to seize business assets to settle late tax bills against 1,080 SMEs last year, highlighting how critical it is that small businesses secure funding prior to the upcoming July 31 tax deadline, said Funding Options, the online business finance supermarket.
Funding Options says that under a power known as ‘distraint’, HMRC staff can raid business premises without warning, and seize goods or assets to cover the value of unpaid tax, penalties and interest payments without a court order.
With the July 31 tax deadline just days away, Funding Options explains that it is not widely recognised that small businesses*, as well as filing their self-assessment tax returns by the end of this month, must also make an up-front payment of 50% of their annual tax liability in one lump sum. This can run to hundreds of thousands of pounds for some businesses, making it crucial that funding is in place if that cannot easily be covered by cash flow.
Funding Options warns small businesses that asset seizure is a now a realistic consequence of failing to pay tax bills on time, with HMRC under pressure to increase its tax receipts. It adds that SME applications for leniency over tax bills, such as through the Time To Pay scheme, are now much less likely to be accepted than at the height of the recession.
Funding Options says that this approach has led an increasing number of SMEs to use alternative sources of finance, such as crowdfunding, p2p lending and alternative overdrafts to manage their cash flow through the bottleneck of the tax deadline.
Funding Options adds that when assets are seized, HMRC often auctions off the seized goods to cover the unpaid tax, although in many cases, the goods raise less than their market value. HMRC can then continue to pursue the business for any outstanding arrears.
This can be just as devastating to businesses as it would be to those with more valuable equipment, such as manufacturing businesses. Funding Options says that many businesses across sectors as diverse as professional and financial services, design and IT could easily be forced to close by a seizure of a few relatively low-value items, such as computers or network equipment.
Conrad Ford, CEO of Funding Options, said: “Businesses need to be aware that HMRC is much less forgiving of payment problems than it was a few years ago, and having funding in place for tax bills is now absolutely vital for businesses that might struggle to cover such a big lump sum through cash flow.
“The July 31 tax deadline can be a major pinch point in SMEs’ cash-flow cycles. It is essential they use the remaining days to get sufficient funding in place.
“Taking control of finances in order to cope with the pressure of tax deadlines is paramount for SMEs that want to remain stable. SMEs need to investigate all the options available for them if traditional lending is difficult for them to secure.
“There is now a whole universe of alternative finance available for SMEs, from crowdfunders to p2p lenders, challenger banks, alternative overdraft providers and a vast range of others. Every small business needs to be aware of exactly what its options are when it needs funding.”
*Sole traders, unincorporated businesses and partnerships