Businesses are being forced to turn to credit cards to pay their tax bills.
A Debt recovery experts’ Freedom of Information Act request reveals true extent of economic crisis.
Record numbers of cash-strapped businesses are resorting to their company or personal credit cards in order to pay their tax bills, according to figures obtained from HM Revenue and Customs.
As recently as 2005/2006 just 6,083 credit card payments, totalling £2.2 million, were made to the Inland Revenue to meet PAYE, corporation and personal tax bills.
However, for the financial year ending March 31, 2010, this figure had escalated to 365,221 credit card transactions – totalling a staggering £485,919,312!
This represents a 220-fold increase in the amount being paid on the ‘never-never’ – and lifts the lid on the true extent of the financial crisis facing struggling businesses.
The figures were obtained under the Freedom of Information Act on behalf of the Debt Recovery team at Harrogate-based Ashworth Law.
Ashworth Law Joint Chief Executive, Mathew Cobley, said:
Over the last 12 months, we have witnessed a three-fold increase in the value of debts we are being asked to chase on behalf of our clients, whilst the at the same time the debtors are asking for longer to pay.
Debts pose a serious threat to the future success of many businesses – with cash flow increasingly becoming the biggest problem.
If the Inland Revenue didn’t accept credit card payments then I am confident we would see a lot more businesses going to the wall. This and the Time to Pay scheme are real lifelines.
However, this could perhaps be avoided if companies improved their cash flow and chased debtors more aggressively.
The figures revealed show a massive rise in the number of businesses choosing the credit card option. Between April and October 2011, £266,570,881.54 had already been collected via 184,587 credit card payments.
Mr Cobley added:
With outstanding corporation and personal taxation payments having to be settled by next Tuesday (January 31, 2012), I’m sure the final figure will surpass last year’s total after the end-of-the-year rush to meet the deadline.
Credit cards may be a short term fix, but the message is that businesses need to have a proper credit control mechanism in place, so they have the money in the bank to avoid credit cards and the high interest rate that will continue to plague them.
They may get HMRC off their back – but the costs of the credit cards will continue.