Accountants Say Businesses are Struggling to Pay Tax Bills

Accountants and financial advisers play a crucial role in helping businesses manage their finances, and they’re ringing alarm bells. According to a study by Premium Credit, a major finance provider for companies, these experts are observing a growing trend of businesses struggling to meet their tax obligations.

Out of those surveyed:

  • 98% have noted an increase in clients having difficulty paying tax bills in the last year.
  • Alarmingly, 43% of these professionals report a dramatic increase.

Spotlight on Specific Taxes

Not all tax bills are created equal. When the financial professionals were quizzed about which tax bills their clients found most challenging:

  • Corporation tax stood out, with 71% noting a spike in businesses finding it hard to pay.
  • Income tax followed, with 53% observing more clients grappling with it.
  • VAT was another pain point, with 37% seeing a rise in clients battling to settle these bills.

Why Are Businesses Struggling?

Several factors are at play:

  1. Economic Challenges: 55% of accountants and advisers cite the economy’s impact on companies as a top reason for these payment issues.
  2. Personal Issues: Personal life events like divorces were highlighted by 53%.
  3. Cost of Living Crisis: 47% pointed out the escalating cost of living as a significant factor.

Worrying Forecasts

It’s not just about the present. Financial experts foresee the situation worsening:

  • They estimate that currently, 11% of their clients are struggling with tax bills. However, this number is projected to rise to 14% in a year’s time.
  • Nearly half predict that 15% or more of their clients will grapple with tax payment challenges in the coming year.

These are not small sums. The average tax bill causing strain? Around £100,000. Furthermore, 10% of financial professionals revealed that some clients face difficulties with staggering tax bills of £200,000 or more.

Consequences of Missing Tax Payments

The implications for not meeting tax obligations can be hefty:

  • A delay in corporation tax payment by just a day can lead to a £100 penalty.
  • Missing VAT payment timelines can cost businesses as much as 15% of the unpaid VAT amount, although these fines only kick in after a 15-day delay.

Expert Insights

Jennie Hill, Chief Commercial Officer at Premium Credit, sheds light on the situation, remarking, “Accountants and financial advisers are good judges of the health of small businesses, and they’re signaling increasing distress.” She emphasises the gravity of the situation when firms struggle with average bills of £100,000, pointing out the urgent need for solutions to aid companies in fulfilling their duties while maintaining effective operations.

Conclusion: The Road Ahead

As the economic landscape continues to shift, the strain on businesses to manage their financial obligations is clear. It underscores the need for supportive measures and solutions, ensuring that UK businesses can weather these challenges and thrive in the future.