Options for business as HMRC’s leniency ends


Since 2020, HMRC has exercised significant forbearance in the payment of VAT, Corporation Tax and PAYE, as businesses and individuals faced significant financial difficulties due to the pandemic.

However, the country’s total tax debt now stands at £46.9 billion, which is more than double pre-pandemic levels of £19 billion. This ballooning tax debt means that businesses need to prepare for HMRC to get tough on taxes in 2023.

While the Revenue will remain supportive for businesses in financial distress, through Time to Pay arrangements, the bar of eligibility is likely to be far higher.

“We are expecting to see HMRC ‘get tough’ in 2023, especially where businesses have outstanding HMRC debts,” said Paul Trickett, one of Bathgate Business Finance’s VAT and Tax Finance specialists. “It is likely to move back to the stricter, pre-pandemic criteria for the Time to Pay scheme and tougher penalties for late filing and payment – up to 6% on outstanding debt – will compound already sizable tax bills.”

This tougher stance, combined with HMRC’s expanded debt collection powers, which now allow it to recover some debts directly from bank accounts, ask for security for tax debts, and even use bailiffs.

“Businesses we speak to are feeling the weight of these pressures mounting, particularly as the financial year ends for many and with the news of reduced support for SMEs via the Energy Bill Discount Scheme from April,” said Paul. “At such a concerning time, it’s vital to ensure access to finance and it’s important that businesses engage their accountants and independent finance specialists to understand the breadth of options available to them.”

West Kirby-based business finance specialist, Bathgate, has already helped many of its clients to navigate the various financial challenges posed throughout the pandemic, from Tax and VAT bills, to starting to repay Government schemes such as Bounceback Loans, CBILS and CLBILS.

Paul continued: “This is just another knock-on effect from the pandemic and there are solutions. Over the next 12 months, cash flow will be king, so preserving working capital is vital. There’s a common misconception that seeking finance to pay a Tax or VAT bill is somehow an indication of poor financial management or that a business is struggling, when in fact it can be a prudent decision.”

Tax loans can be arranged over a 6 – 12-month term, while 3-month VAT loans with fixed payments can be secured, either via Bathgate’s own lending book or through brokered facilities.

One example of such a facility in action is the partial funding of a quarter-end VAT return for a North West legal firm, which was arranged by Bathgate late last year.

“The return was due to HMRC by the close of business the day after the client approached us. The proximity of the payment deadline meant the client expected to fully fund the payment themselves, then receive the required funding from a lender within 3-5 days,” explained Paul. “The application was submitted to Bathgate’s own book underwriting committee that same evening. By the next morning, the application was approved, documents were drafted and issued to the client and the deal was done and funding paid to the client by lunchtime.”

However, there are even more options that can spread the burden of payments and support business growth. “Looking at finance options around Tax and VAT can even open doors for solutions that can also help to progress your business, such as a short-term three-month loan to cover your VAT bill and the purchase of new stock,” said Paul. “Doing this doesn’t mean you’re in a bad position, it means you’re using what is available to you to build your business.”

“Tax and VAT finance is just one tool in the financial management toolkit, speaking to and working closely with business finance advisors is vital for keeping abreast of the range of solutions available to you. So many funders have returned to the marketplace and there is a wider than ever variety of options available for businesses to keep cash flow steady and support business recovery and growth.”

To discuss your business finance options please contact Paul Trickett on 07469140180 or email proposals@bathgatebf.co.uk