HMRC doubles asset seizures from businesses over unpaid VAT

HMRC has almost doubled its use of powers to seize businesses’ assets in order to settle late VAT bills in the last year.

Syscap says that HMRC used its powers to seize business assets – a process known as distraint – 4,746 times to speed up the payment of VAT last year, a 98% increase on the 2,401 times it used these powers to recover overdue VAT the previous year.

Philip White, CEO of Syscap, said: “Small businesses need to be aware that HMRC is becoming more and more aggressive in claiming VAT payments. Where it might have made some allowances in the past, it is now much less likely to relent in chasing the payments it demands.

“Businesses could previously find some respite in the Time To Pay scheme, which could grant a short extension to a tax deadline. HMRC’s use of that scheme has now dwindled significantly, which leaves a lot of businesses with very few options.

“Prior to the credit crunch, banks were offering more credit to SMEs, so businesses could fund their VAT bills through loans or overdrafts. Since then, however, capital adequacy rules have forced banks to rein in their lending which has made it more difficult for SMEs to rely on bank funding alone.

“As VAT bills are payable on invoiced work rather than receipts, many businesses will find themselves paying tax on work they haven’t yet received payment for. These businesses are likely to have invested money up-front in fulfilling contracts, putting further strain on available cash.

“While this pressure on cashflow might have been a nuisance prior to the credit crunch, problems with a big VAT bill could now be a serious threat to the future of a business.

“It is vital that businesses explore what other funding options are available to them, to make sure they use the most appropriate funding lines to manage predictable events like tax bills, and keep short-term options like overdrafts for emergencies.”

The Brightest Star in Europe for Car Sales is the UK.

John Leech, UK head of automotive at KPMG, has commented on the figures released by the European Automobile Manufacturers’ Association, showing that the number of cars sold in Europe fell by 9.8% in the quarter ending 31 March 2013, and by 10.2% during the month of March 2013. 

“There is no light at the end of the tunnel for car manufacturers, as car sales continue to freefall in Europe. Indeed 2013 is already shaping up to be the seventh straight year of falling car sales in Europe. The UK remains the only bright spot, enjoying increased sales of 5.9% in March; it also compares favourably to Germany, which saw sales drop by 17.1%, and France with a drop of 16.2%.

“The UK performance is even more remarkable given that the euro has weakened by 10% compared to sterling in the last six months, meaning that it is 10% less profitable for European car makers to sell cars in the UK compared to six months ago.  However, at the moment the UK is the only show in town for car makers who remain happy to support the UK market with discounts at historically high levels.”

March freeze costs UK small businesses £174m, says the FSB

More than half (55%) of UK small firms have been impacted financially by the recent prolonged cold weather, costing them £174m, according to the findings of a new survey from the Federation of Small Businesses.

The research showed that around six in 10 small businesses were impacted by the cold snap and that loss of demand (30%) and closures (26%) were the common impacts. Of those who closed or temporarily stopped trading, an average of 2.2 days was lost. Furthermore, around 27% of firms had staff absent for at least one day. The FSB says that, on average, each business lost £1,580.

In addition to the effects of the cold snap, one in five businesses also said they had been negatively impacted by the flooding in 2012. 

Mike Cherry, the FSB’s national policy chairman, said: "We may finally have turned a corner into spring, but it's been a long haul, following the coldest March in 100 years. While a few businesses have managed to take advantage of the weather many have found it difficult to manage. Not only have they had to cope with a lack of demand for products, but many have had to close.

"Our fear is that this prolonged cold spell will mean people are travelling by car to supermarkets or out-of-town shopping centres rather than utilising local shops. We need people to keep trade local and support local businesses that may be struggling as a result of the weather."

SMEs get £70 million funding boost

Small and medium-sized businesses (SMEs) are set to receive a £70 million lending boost as part of government action to increase the availability of finance.

Three new lenders – Market Invoice, URICA and Beechbrook Capital – will share more than £30 million of government funding to offer SMEs alternatives to traditional bank lending.

They have committed to attracting additional funding from private sector investors, with the total expected to boost the pool of credit available to SMEs from the three lenders by more than £70 million

Business Secretary Vince Cable said on 22 March: “A lack of access to finance is still choking off too many small businesses, preventing them from growing, taking on new staff or investing in new equipment.

“We are taking a range of actions to support SMEs and shake up business finance markets, including through the new business bank.

“Today’s £30 million announcement is an important boost for non-traditional lenders with creative and innovative solutions. It will increase competition and create a more diverse and balanced market for business lending.”

The funding comes from the Business Finance Partnership (BFP), through which the government has committed to provide £100 million of funding for non-traditional lenders in order to diversify sources of finance available to SMEs.

Currently, 85 per cent of all business loans are handled by the big four banks.