U.K. small businesses owe millions in VAT bills, a new report from Funding Options said.
The marketplace lending platform said Tuesday (Jan. 24) that SMEs in the nation owe nearly $3.25 billion in overdue VAT, a sign of cash flow management challenges. Funding Options pointed to late B2B payments in particular as a key factor behind why small businesses are struggling to pay their taxes.
That means SMEs are facing late payment penalties from HMRC, the U.K. tax body, reports noted, and also face the threat of tax collectors. Even if a corporate client pays an invoice late, the VAT on that invoice must be paid, Funding Options explained.
“Businesses not being able to pay their VAT bills on time is a problem that is not going away,” said Funding Options CEO Conrad Ford. “However, by having to pay late, they risk having their assets seized or their business shut down altogether.”
Funding Options is promoting the use of alternative finance to help SMEs access the working capital they need to pay their tax bills.
“Alternative finance offers a vital solution to this problem — allowing businesses to find the cash in order to pay their bills on time and invest in their business,” the executive continued. “The ongoing fallout from Brexit could hamper small businesses further, particularly for those businesses which export their products outside of the U.K. as the fall in sterling affects currency exchange rates.”
Ford added that late VAT bills are not necessarily a sign that a small business is in trouble. Instead, successful businesses may be paying tax bills late because their own corporate customers are paying invoices late.