NEW research from Premium Credit shows the cost of living crisis is increasing the tax bill pressure on SMEs with more than 430,000 firms currently struggling to pay money owed to HMRC.
The study by the leading provider of finance for companies’ tax bills with SME owners and managers found nearly one in five (17%) say it has become harder to pay their tax since the cost of living crisis started and nearly one in four (23%) believe it’s likely their company will find it tougher paying one or more tax bill in the next five years.
Currently one in 12 (8%) of the UK’s 5.546 million SMEs say they are struggling to pay tax bills with VAT and Corporation Tax most likely to be causing financial headaches. Of these companies, around 42% say they will look to agree payment terms with the tax authorities but 26% say they will cut jobs to pay the tax bill.
However problems paying tax bills is a long-standing issue for SMEs, the research found, with one in seven (14%) – more than 750,000 firms, admitting they have found it challenging to pay a tax bill in the past 10 years. The average amount owed was around £50,400 but 9% said they had owed more than £100,000.
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.
Around one in three (31%) of SMEs questioned say they would consider such a schemes regardless of whether they struggle to pay their tax bills or not and benefit from the convenience of spreading their payments as awareness of the convenience of spreading the cost of tax bills continues to rise.
SMEs who have struggled to fund tax bills in the past 10 years were most likely to have agreed payment terms with HMRC. The study found 31% did so but 21% cut jobs in order to pay HMRC while 25% took on more work.
Jennie Hill, Chief Commercial Officer, Premium Credit (Specialist Lending) said: “It is worrying that so many SMEs are finding it hard to pay their tax bills and that some are considering cutting jobs in order to afford to tackle this issue.
“Any company which is struggling should consider spreading the cost for up to a year which for a small fee will help them to pay their tax on time and improve cashflow when it is needed.”
For further information on Premium Credit’s Tax and VAT funding proposition, please visit https://www.premiumcredit.com/products/tax-and-vat .
