A major accountancy group has warned that a huge number of small and medium-sized enterprises (SMEs) may not be able to repay deferred tax and VAT payments.
The research, published by the Association of Chartered Certified Accountants (ACCA), highlights how delayed and rejected finance applications through the Coronavirus Business Interruption Loan Scheme (CBILS) could impact on their ability to repay deferred tax bills.
According to the survey, six in 10 small businesses who have made enquiries for a CBILS loan are still awaiting a response, while just four per cent have progressed to the full application stage, and nine per cent received approval.
However, many of these businesses are relying on CBILS finance to cover tax and VAT bills, which have been deferred until the end of the 2020/21 tax year.
Under the VAT deferral scheme, registered businesses are not required to make a VAT payment normally due with their VAT return between March and June 2020. These businesses are instead given six months to pay any liabilities accumulated.
But the ACCA study shows that 55 per cent of clients who applied for CBILS finance also deferred tax payments, with 64 per cent of those reporting that they are unlikely to meet these tax liabilities in six months’ time should their application be rejected.
Commenting on the findings, head of ACCA UK Claire Bennison said despite success for some firms, others are now regretting their decision to defer payments.
“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 said.
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