Late payers 'pushing suppliers into VAT arrears'

The scourge of late payment is fuelling consecutive increases in the amount of VAT that has not been paid on time to the taxman, believes a financing advisory.

LDF says that smaller companies are typically pushed past the VAT payment deadline due to their own cashflow being crippled by their customers not paying promptly.

The economic recovery is squeezing tiny traders too, because larger clients are using the upturn to boost capacity and, as a result, paying their small suppliers can get “overlooked.”

“Should a client pay late, the business [supplying that client has]…less cash available [to pay VAT on time],” added LDF’s managing director Peter Alderson.

“The present 20% VAT rate may also be having an effect, as it now represents a significantly larger tax consideration than pre-2011.”

Mr Alderson evidenced his claims by pointing to official figures showing that UK businesses owe almost £2.6billion to HMRC in overdue VAT payments, up from £2.55 billion in 2014.

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