UK firms owe HMRC £2.7 billion after VAT holiday

UK firms owe HMRC £2.7 billion after VAT holiday

More than one in four businesses that deferred tax payments during the initial lockdown last year still owe HMRC billions of pounds.

A total of 156,500 out of 590,000 businesses that utilised Chancellor Rishi Sunak’s VAT deferral between March and June have failed to make contact with HMRC to pay what they owe, even though the deadline to repay it or arrange a repayment plan passed on June 30.

Figures released by HMRC in response to a freedom of information request have revealed that the amount of tax owed was £2.7 billion, 9% of the total of VAT that was deferred, while £17.8bn has already been paid and £13bn is due through monthly instalments.

It is expected that the figures will heighten concerns that the UK Government will never recover the majority of the coronavirus support and tax breaks distributed during the first lockdown, with some claimants going out of business and others being pursued by HMRC debt collectors.

HMRC has said that businesses that do not contact the tax authority to arrange VAT payment plans will face penalties of 5% of the money owed, plus interest. However, those that continue to fail to come forward are likely to face debt collectors, The Times reports. 

Data published by HMRC last week has also revealed that it initiated 102,000 investigations into taxpayers suspected of tax evasion and avoidance in the first quarter of this year, up 36% from the 75,000 launched in the previous quarter.

A spokesman for HMRC told Scottish Financial News: “HMRC will support any taxpayer in financial distress as a result of Covid-19 and any business that may struggle to pay its deferred VAT should contact us.

“Businesses had up to June 30 to make arrangements to pay deferred VAT, so those who failed to take action should contact HMRC to pay what they owe. They may be eligible to receive support with their tax affairs through HMRC’s ‘time to pay’ service.

“These arrangements are agreed on a case-by-case basis and tailored to individual circumstances and liabilities.”

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