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Companies will Struggle to Settle Deferred VAT Bills, Advisors Warn

Companies will Struggle to Settle Deferred VAT Bills, Advisors Warn

Businesses across the UK will find it difficult or impossible to settle all their VAT bills next year unless they are given more breathing room in light of the Covid-19 crisis.

That’s the view of the tax advisory firm Blick Rothenberg, which is warning that VAT bills from HMRC could soon become a serious financial headache for companies nationwide.

A large number of firms took up the option of deferring their VAT payments this year, which was a choice given because of the exceptional circumstances surrounding coronavirus and the impact it had on so many aspects of people’s lives and the economy.

But while the chance to defer VAT bills for a time was welcomed by businesses, the reality is that a significant number will still be struggling to pay what amounts they owe HMRC in the first half of 2021.

“HMRC are now writing to those businesses that deferred their VAT payments reminding them that they have to be made by March 31st,” said Andrew Sanford, from Blick Rothenberg.

“The big problem is that many businesses with the current restrictions in place will simply not be able to trade their way out of their current financial predicament.”

Mr Sanford points out that the current situation means that lots of companies will find themselves being asked to make two VAT payments in the first few months of next year, which for many will be a huge financial burden.

“With increased Covid infection rates, and the real threat of more localised and national lockdowns many businesses will be fearful that they will have insufficient funds to settle these liabilities,” he said.

According to Blick Rothenberg, what’s needed is a greater degree of clarity about how some of these issues can be resolved and a willingness to allow companies to spread their deferred VAT payments over summer 2021.

“Businesses who can demonstrate a tangible loss as a result of Covid-19 should be allowed automatically to spread the deferred VAT payment for six months over the Summer of 2021 when they are more likely to be trading sustainably,” Mr Sanford has said.

“If this is not addressed, we could see a spate of insolvencies and redundancies, which will ultimately reduce the tax take, and mean that many other firms are affected by bad debts from insolvent customers, causing in turn even more issues.”

David Tattersall
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