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Accountants and financial advisers are becoming increasingly concerned about their clients’ ability to pay important tax bills, new research from leading provider of finance for companies Premium Credit shows.
Almost all (98%) of the accountants and financial advisers supporting clients with tax say the numbers struggling to pay bills has increased in the past 12 months with more than two out of five (43%) reporting a dramatic increase.
Corporation tax bills are the biggest worry. 71% of accountants and advisers say they are seeing the biggest increase in clients struggling to pay it compared with 53% who report rising numbers struggling to pay income tax and 37% seeing rises in clients struggling with VAT bills.
The economy and its impact on companies is the main reason for tax payment issues. 55% of those questioned said it was among their top three reasons for clients struggling with tax. Around 53% cited personal reasons such as divorce and 47% highlighted the cost of living crisis among the top three.
On average accountants and advisers currently estimate 11% of clients struggle to pay tax bills with more than a fifth estimating 15% or more of clients have problems paying tax.
The study also found that accountants and advisers expect the issue to worsen. In 12 months’ time they expect the average number to rise to 14% with nearly half estimating 15% or more of clients will have tax payment problems.
The average bill clients are struggling to pay is estimated at around £100,000 although one in ten say clients have problems paying tax bills of £200,000 or more.
Penalties and fines for missing tax deadlines range from £100 for being a day late with a corporation tax payment to as much as 15% of the amount of VAT not paid on time. Fines for paying VAT late only start after payment is 15 days overdue.
Jennie Hill, chief commercial officer at Premium Credit, said: “Accountants and financial advisers are good judges of the health of small businesses and they are reporting increasing distress from firms on their ability to pay their tax bills.
“With firms struggling to pay average bills of £100,000 there is a real need for solutions that can help companies to meet their obligations and continue to operate effectively.”
