- 18th April 2019
- Posted by: Suzy Hill
- Category: Personal Tax, Business News
Businesses warned on winding up perils over unpaid tax
HMRC applied to shut down 4,160 businesses because they had fallen behind on their tax payments in 2018 with financial problems being exacerbated by a late payment culture
Based on analysis of HMRC’s winding up petitions by Funding Options, the tax authority is still being too aggressive in its approach to shutting down businesses, particularly given the tough trading conditions caused by Brexit uncertainty and slowing global economic growth.
Funding Options suggests that instead of liquidating businesses, HMRC should take a more sympathetic approach with them, perhaps giving them more time to pay their bills. HMRC has a ‘Time to Pay’ scheme that allows taxpayers to spread overdue tax payments over longer periods, which was used to tide small businesses through the last recession.
Conrad Ford, CEO of Funding Options, said: ‘HMRC continues to take a hard line approach despite businesses facing tough economic headwinds.
‘While HMRC has eased back from last year when they tried to shut down 4700 businesses, it should be looking to give them even more leeway.’
Funding Options says its research indicates that a key reason behind some businesses not being able to meet their tax payments on time is late payments by larger clients. Some tax bills, such as VAT and corporation tax, are billed on money invoiced, rather than money received. Being paid late by clients can, therefore, make it harder for a business to pay their bills on time.
Funding Options says that small businesses should also be looking at ways to improve their cashflow management to avoid facing HMRC sanctions. If a business is able to identify the finance options available to them as early as possible, it is less likely to run into HMRC-related difficulties if they do arise.
Ford said: ‘In an ideal world, small businesses would be paid in good time by their clients, meaning they have less trouble meeting their tax obligations. However, that’s not always the case, so businesses must be prepared and know how they are going to manage their finances through the tricky periods.
Contact us if you need help in improving your cashflow