Value Added Tax, more commonly called ‘VAT’, is a form of consumption tax imposed on most of the goods and services of registered businesses. It ranks as the third largest government revenue source in the UK, with the HM Revenue and Customs (HMRC) administering and collecting it.
Even though this type of tax definitely benefits the country and its residents, many UK businesses have difficulties paying them on time. In fact, many of them owe nearly £2.6 billion in overdue VAT payments. Despite the continuously improving economy, this number remains unchanged.
The Possible Reasons behind the Late Payments
Many factors contribute to the late VAT payments of businesses. One is that a great majority of them need to wait longer for their suppliers’ payments, with the average time frame at 72 days. In the event that a client makes a late payment, the business still has to pay the tax on the corresponding invoices, even when they have to use other sources of fund.
The number of companies and organisations taking advantage of the recovering economy is also on the rise. Corporate and Medical Finance Ltd agrees that many of them place so much focus on growing their businesses in terms of equipment, staff, and infrastructure investments that they tend to overlook their VAT payment deadlines.
Managing VAT Payments without Putting Too Much Stress on Cash Flow
Now that the current 20% VAT rate has a larger consideration, more businesses may find themselves in a difficult situation.
Businesses, however, should not have to compromise their plans for expansion nor their cash flow just to make good on their VAT payments. With the right payment management plan, such as the inclusion of short-term VAT loans to fund their payments, they can free up more capital for other necessary business expenditures while still ensuring they pay their VAT responsibilities without delays.
VAT may be a burden, but it is a requirement. Fortunately, there are many ways to manage this regular business expenditure.