Study reveals SMEs increasingly need support to meet tax deadlines

Nearly one in 12 SMEs – around 440,000 firms- say they have missed tax payment deadlines in the past year with a third of them admitting to missing five or more, new research from Premium Credit, a leading provider of finance for companies’ tax bills, shows.

The study with SME owners and managers found 8% of the UK’s 5.55 million SMEs have missed tax payment deadlines for Corporation Tax, VAT and other taxes and shows companies are increasingly looking for alternative solutions to help meet these costs.

SMEs are split over whether HMRC has toughened its stance to tax arrears and deadlines recently – 18% believe it has while 19% say it has become more understanding. Around a third (32%) say there has been no change while 31% did not express a view.

But they are tending more towards Labour over the Conservatives in terms of producing a more tax-friendly environment for businesses. Around 36% believe Labour will be better for tax compared with 30% choosing the Conservatives. More than a third (34%) did not express a view.

Tax worries are rising – around 388,000 say they have used HMRC’s Time to Pay (TTP) scheme, which enables eligible business to pay Corporation Tax arrears usually within three to six months, during the last five years. Around one in eight (12%) say they may use the TTP scheme within the next three years.

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 58% rise in the number of clients using its service last year.

Missing deadlines can be expensive – penalties and fines 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 start after payment is 15 days late.

The research however shows consequences can be much worse – around 11% of the SME managers and owners questioned say they have worked for firms which went out of business because they could not pay tax bills.

Around 390,000 said there was a risk their current firm could go under in the next five years over tax issues while a similar number say they have in the  past worked for firms where HMRC has sent enforcement officers or bailiffs to identify goods for seizure to meet tax bills.

Jennie Hill, chief commercial officer, Premium Credit (Specialist Lending) said: “SMEs are clearly feeling the strain on tax bills with large numbers admitting to missing deadlines and others looking to clear arrears over three to six months through HMRC’s TTP scheme.

“Spreading the cost of tax bills over a year for a small fee will help companies to plan more efficiently  and avoid any risk of fines or penalties which can be crippling for a business that is already struggling to meet its tax obligations. Even if your company is not struggling to pay its tax bills, being able to spread the cost can be very beneficial in terms of managing cash flow and investing in the business, which is the main reason why many of our customers use us. ”