Tuesday, 23 April 2013

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.”

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