Wednesday 14th October, 2015

Late payment from clients is forcing UK businesses to delay paying tax to HMRC, with HMRC owed £2.58bn in overdue VAT, compared to £2.55bn in 2014.

According to Finance provider LDF, this number has remained consistent over the last few years, with the improving economy having little impact on the level of VAT arrears and late payment.

LDF says that one of the main reasons for VAT arrears is late payment to SMEs, as customers continue to lengthen payment terms despite an improving economy.

VAT is paid not on a company’s actual revenues, but on the amount billed to clients, regardless of whether it has been paid or not.

Peter Alderson, managing director of LDF, said: "VAT bills can very quickly become a problem for SMEs if their clients delay paying their bills, and we understand that this is a real problem for many small businesses."