Small businesses have been urged to contact HMRC before the VAT and Corporation Tax deadlines, as many continue to struggle with pandemic-era borrowing, rising employment costs and slower summer cash flow.
Experts say they are seeing the Revenue’s Time to Pay arrangements, originally designed as a short-term solution for businesses facing temporary financial pressure, becoming an increasingly permanent feature of small business cash flow management.
Many SMEs are still repaying Bounce Back Loans, Coronavirus Business Interruption Loans and other liabilities deferred during the 2020 pandemic. Combined with higher operating costs, including increases to employer National Insurance contributions, such legacy debts are leaving many businesses with little financial flexibility when major tax bills fall due.
“Many of the small businesses we speak to are still carrying debt burdens that date back to the pandemic,” said Todd Davison, Managing Director of Purbeck Personal Guarantee Insurance, who warned that such measures “didn’t disappear, but were simply pushed further down the road.
“Those commitments are now colliding with higher operating costs, leaving many businesses without enough headroom to absorb a significant VAT or Corporation Tax bill.”
He added that seasonal factors are adding further pressure on SMEs.
“Summer naturally slows cash flow. Finance teams, accountants and the people businesses rely on to approve and settle invoices are often on annual leave, so payments take longer to arrive. An invoice that would normally be paid within a week can easily take three. Businesses already managing HMRC Time to Pay instalments often don’t have that level of flexibility.”
While Time to Pay remains an important lifeline for viable businesses facing temporary financial difficulty, Purbeck warns that relying on successive repayment plans can indicate deeper financial challenges.
Davison added: “Time to Pay is an invaluable facility, but when one instalment plan is followed by another, it’s often a sign that underlying cash flow pressures haven’t been resolved. Each new tax bill arrives before the previous one has been cleared.”
