Overdue VAT only £2.5bn, well it’s better than last year!

National Living Wage

I recently read a very interesting article stating that businesses in the UK owe HMRC £2.5bn in overdue VAT. The good news from the taxman’s point of view is that this figure is reducing and was only £2.7bn last year! This reduction has been achieved by an increase usage of distraint (the right to seize business assets) and using external debt collection agencies. This does prove that businesses in the UK are struggling with their cash flow and it is therefore important to ensure you are using all the available VAT schemes to help your business. For example, you can complete an annual VAT return and pay your VAT over 9 months or if your turnover is below £1.35m per year you don’t have to pay the VAT over until you get paid. An important scheme that a lot of smaller businesses are not aware of is the Flat Rate Scheme. This can be used where your turnover is below £150,000 and you pay a flat % over on your turnover based on your industry. The benefit of this scheme is that you can choose to apply it if you are financially better off and it can save time preparing your VAT returns. If you do get into trouble paying your VAT then you could approach your bank to help fund the payment, however I’m not sure they would be very accommodating or you could approach a short term lending company. I’m aware of one that is launching shortly where they will lend the business anywhere between £2,000 and £10,000 from 2 months to a maximum of 6 months at competitive interest rates. The company offering this service is Canali Capital Ltd and they are bridging a gap in the market that the banks are not interested in.