£2.6bn in owed VAT due to late payments from customers

28 September 2015

UK businesses owe approximately £2.6bn to HMRC in overdue VAT, this is up from £2.55bn in 2014.  It would appear this has happened due to late payment from clients according to a finance provider LDF. In essence given that VAT is paid on the production of an invoice, not when the firm is paid, then in many cases the company will have no choice but to delay payment to the HMRC if the customer is late paying.

LDF said this outstanding amount has remained consistent during the past few years, with the improving economy having little impact on the level of VAT arrears and late payment.  It should be noted that it is likely though that the overall take of VAT is up given the improvement in the economy, so the percentage arrears have gone down.

Peter Alderson, managing director of LDF, said: “VAT bills can very quickly become a problem for SMEs if their clients delay paying their bills, and we understand that this is a real problem for many small businesses.”
“Even though economic growth is accelerating and order books are growing, the problem of VAT arrears does not appear to have improved.”

At KSA Group we certainly concur.  A business should always have sufficient money in the form of working capital to ensure that any VAT can be paid over even if some payments have not come in.  The money of course does not belong to the company but merely collected on the tax payers behalf.

In these instances though HMRC are normally happy to allow the company to pay back the money in what is known as a "Time to Pay" deal.  However, they do have little patience if any deal is broken and may seek to wind up the company if it feels that it cannot pay. Before agreeing any time to pay deal it is a good idea to double check that the company can afford the payments.  Enquire on 01289 309439 and we can advise.

If you have any problems collecting in money then take a look at our debt collecting page.