UK businesses now owe £1.8bn in late corporation tax – an increase of 15 per cent since 2015
More businesses are struggling to pay their tax bills, as the amount of overdue corporation tax owed to the taxman continues to rise.
According to Funding Options, an online aggregator for small business finance, the total value of corporation tax payments in arrears has risen 15 per cent in the past year, from £1.59bn to £1.82bn.
Among the sanctions used by HMRC for overdue tax are late payment penalties and asset seizures. The latter, Funding Options said, is a particular risk for smaller firms because of volatile cash flows which can make it more likely that they fall behind on tax payments.
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It noted that while small businesses often rely on bank overdrafts to address shortfalls in cash flows, they have had those overdrafts cut by £5bn (37 per cent of the total) over the last five years, which can impact on ability to pay tax bills on time.
Conrad Ford, chief executive of Funding Options, said: "These figures demonstrate the growing pressure on cash flow for companies, which could get worse following the outcome of the EU referendum."
The company warned a slowdown in the economy could lead customers to delay payments. The British Chambers of Commerce has forecasted a sharp slowdown in UK growth to 1.1 per cent for 2017, amid ongoing uncertainty and higher inflation.
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It did though also say UK growth will be stronger than expected for this year, after firms adopted a "business as usual" approach after the vote to leave the European Union – it forecast growth of 2.1 per cent for this year, up from a previous prediction of 1.8 per cent.
The amount of overdue corporation tax owed to HMRC (Source: Funding Options)
Last month, the Prime Minister pledged to charge the lowest rate of corporation tax in the G20. The government had already promised to lower the change from 20 per cent to 17 per cent by 2020 and confirmed the fall in Philip Hammond's Autumn Statement.