Two-thirds of SMEs unable to pay tax liabilities

A recent survey has found that two-thirds of SMEs will not be able to pay their deferred tax liabilities six months from now. 

According to the latest ACCA UK and The Corporate Finance Network’s (CFN) SME Health Tracker, 55% of businesses have decided to defer their tax payments. 

However, only 36% say they are likely to be able to meet these tax liabilities in six months’ time, with a further 64% unable to do so.  

The findings come from a panel of accountants representing over 16,000 SMEs in the UK. The panel found that 61% of firms that made enquiries regarding CBILS are still awaiting a response, with only 4% having progressed to a full application and 9%.

However, the tracker also noted a “surprising recent stability”, with only 3% of SMEs deciding to close, compared to the 5% that decided to close two weeks ago. 

It also noted an “improving trend” regarding cash access during lockdown. Only 12% of SMEs said they will struggle to access cash to last the next two weeks, against the 30% who reported a struggle in the 28 April tracker. 

Meanwhile, 16% said they would not be able to access cash to last the next four weeks, compared to the 38% of respondents on 28 April.

Claire Bennison, head of ACCA UK, said: “With the Coronavirus Job Retention Scheme now extended until October, and the recent rescue packages announced by the government, we’re seeing two sides to this tracker. 

“Some schemes seem to be working well for SMEs and entrepreneurs. But alarm bells ring about the decision to defer taxes – this could be VAT, corporation tax and personal taxes, which all stack up for the future alongside PAYE and National Insurance payments.” 

She added: “We’re also hearing about the mental strain SMEs are under – and deferring will only add to this stress and strain in the near future.”

Kirsty McGregor, founder of The CFN, said: “There’s a set of SMEs stuck in the middle – those who have perhaps 20 to 100 staff with a £1m to £3m turnover. 

“These are the SMEs caught in a trap where they’re not being approved for CBILs, and the Bounce Back loan is not enough for them.” 

She added: “The stark reality is that these are the employers who, once furlough tapers off, will not have enough working capital and cashflow to kickstart their trade. 

“Releasing more funds to these businesses is the critical requirement if we are to ensure the future survival of this key segment of our SME community.”