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Businesses seeking time to pay on VAT bills are twice as likely to have their application rejected as they were last year, according to a leading independent finance provider.
Figures obtained by the company Syscap under the Freedom of Information Act show that the number of refusals by HMRC of requests to delay VAT payments more than doubled to 11.2% in the first quarter of 2010, compared with 5.3% in the same period of 2009.
Many creditworthy firms are unable to pay their VAT bills because of delays by their customers in paying invoices, claimed Syscap, adding that a sizeable number of small and medium-size enterprises (SMEs) have their VAT bill calculated from when they invoice a customer, not from when they receive the money.
This means they can incur a huge tax liability that might not be cleared until their customer finally feels their cash cushion is large enough to pay their bills. Delays of six months or more are not uncommon, warned Syscap, which serves the IT sector.
The company's chief executive, Philip White, said it is not just SMEs that are having problems paying their VAT bills.
‘We get requests from businesses that are, on all sensible measures, the best credit risks available looking for VAT funding: from Top 100 commercial law firms through to veterinary practices,’ he remarked.
The Revenue recently introduced a requirement for all Time to Pay requests worth more than £1 million to be supported by an independent business review.
Mr White said: ‘While HMRC say there is no change in policy over granting credit for VAT payments, it does seem they are enforcing existing policy in a way that has increased the number of refusals quite dramatically.’
