Tax  

UK businesses' corporation tax bill jumps

UK businesses' corporation tax bill jumps

The amount of corporation tax UK businesses owe has jumped 15 per cent over the past year, according to online finance supermarket Funding Options.

UK businesses owe £1.82bn in corporation tax, up from £1.59bn.

The slowdown in the UK economy since Brexit could mean that companies have even less cash to pay their tax bills in the future, as their customers delay payments.

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HM Revenue & Customs is using increasingly aggressive methods to recover overdue tax, for businesses unable to pay their corporation tax on time.

Amongst HM Revenue & Custom's sanctions are late payment penalties, sending debt collectors to premises, and asset seizures. All of these eventualities have serious negative repercussions for the offending companies.

According to Funding Options, small businesses are at particular risk of having their assets seized because of volatile cash flows, making it more likely that they fall behind on tax payments.

Such smaller companies, who would typically rely on bank overdrafts to bridge shortfalls in cash flows, have had those overdrafts cut by £5bn  – 37 per cent of the total – over the last five years, affecting their ability to pay their tax bills on time.

They are increasingly using alternative finance to avoid a crunch point in their cash flow when paying tax bills, according to Funding Options.

Invoice finance, P2P lending, and crowdfunding are all possible options available to protect against having to dip into cash or loan facilities allocated for other areas of the business, the online finance supermarket said.

Conrad Ford, chief executive of Funding Options said: “We have seen an increasing number of companies come to us for funding in order to pay their overdue tax bills.”

“These figures demonstrate the growing pressure on cashflow for companies, which could get worse following the outcome of the EU referendum. Companies might want to explore in detail alternative finance options available to them before HM Revenue & Customs comes knocking on their door.”

“Businesses need to make sure they have the adequate funding to pay tax bills on time, without taking capital from other areas of the business.”

ruth.gillbe@ft.com