A business finance reporter has revealed that unpaid VAT along with unpaid corporation tax is at a five-year high.
The figures raise questions about how effective that HMRC’s collection teams really are. Funding Options (FO) said that in 2017/18, unpaid VAT hit £3bn, an increase from £2.5bn in 2013/14.
During the same period, unpaid corporation tax rose from a low of £1.52bn to nearly £2bn for the last tax year with available figures.
These number are, of course, a black mark on HMRC’s record, but aside from this, the amount of unpaid VAT and corporation tax is also not good for the debtors.
FO CEO Conrad Ford warned: “HMRC could drive them out of business in pursuit of those bills. Unpaid VAT and corporation tax put more businesses at risk of HMRC sanctions, which can include director disqualifications, asset seizures and winding up petitions.”
Ford believes that the rise in unpaid VAT and corporation tax may be partly due to an increase in the occurrence of larger businesses failing to pay their smaller suppliers in a timely fashion.
The UK Government has set up the Small Business Commissioner to try and solve this problem, but according to Ford, only eight small businesses have received help in settling their disputes.
Late payments may not be the only issue – the tax system itself may also be partly at fault. Suppliers often have their VAT totalled up when invoices go to their clients. However, until these clients settle their invoices, the suppliers have no money with which to pay their VAT bills.