Revenue toughens up on deferring VAT

A growing number of businesses are having their requests to delay their VAT payments rejected under the Time to Pay scheme, new figures reveal.

In the first quarter, the Business Payment Support Service refused more than 11 per cent of applications to defer VAT bills, compared with 5 per cent a year ago.

In other words, during the first three months of this year, HM Revenue and Customs doubled the number of requests to defer VAT payments that it denies to £42million.

Skycap, an IT finance provider, which obtained the figures under the Freedom of Information Act, said the growth in refusals to defer VAT payments was "worrying."

Particularly so for smaller firms, said chief executive Philip White, which are "still finding it incredibly hard to borrow money from their bank to pay HMRC VAT."

The firm pointed out that many businesses have their VAT bill calculated from when
they invoice a customer VAT, and not from when they receive the money.

The business may, then, incur a huge tax liability that might not be cleared until six months or more when the client feels financially secure enough to pay their bills.

And it's not just small traders who are struggling to pay VAT, the rate of which is set to rise under the new government, according to economists at Schroders.

"We get requests from businesses that are, on all sensible measures, the best credit risks available looking for VAT funding," White said, "- from Top 100 commercial law firms through to veterinary practices."

Wednesday 12th May 2010
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