Businesses struggling with cashflow challenges have been identified as one of the main causes behind the recent rise in unpaid tax debt. HMRC recently published a report that revealed the amount of unpaid tax still owed to the Exchequer had reached £44.5 billion by the end of June this year. That represents a 6% year-on-year increase.
HMRC say the majority of the tax debt is owed by small and medium-sized businesses, with inflationary pressures cited as the cause of the cashflow problems.
Late-Payment Rates Set To Rise
The HMRC performance update report shows that there were 892,673 taxpayers in Time to Pay (TTP) arrangements at the end of June, which was actually a decrease from the 912,233 recorded in March. This shows that while there is only a small difference in the number of taxpayers filing their returns and declaring liabilities on time, there has been a significant decrease in the number of taxpayers actually paying on time.
The Head of Tax Dispute Resolution at accountancy and business advisory firm BDO, Dawn Register, warned late-paying businesses by saying: “Those businesses that are struggling to pay on time also face the prospect of having to pay higher rates of interest for late payments.
“Late payment interest is currently at a 15-year high of 7.5% and this is set to rise even further following the decision by the Bank of England to raise base rates.”
Another indication that small to medium-sized businesses are struggling with cashflow problems is the business failure rate, which is at its highest for 14 years.
Civil Compliance Checks Increasing
In response to the unpaid tax debt, HMRC has been opening a significantly higher number of civil compliance checks against taxpayers. Representing a 28% year-on-year increase, there were 77,000 new civil compliance checks opened in the first quarter of the 2023-24 tax year.
The register also commented on the rise in civil compliance checks, explaining: “HMRC has been under significant pressure to step up its compliance work in recent months, and this may indicate the start of a determined effort to ensure that businesses and individuals pay the right amount of tax.”
Contact Us
Have a debt owed to you but not sure where to begin in getting your money back? Give us a call on 001733 964524 or click here to get in touch today.
Image Source: Canva
