Firms are rushing to secure extra credit to help them pay their tax bills, according to finance provider Syscap.
The firm claims that requests for funding in time for the 31 January tax payment deadline are up 41 per cent compared with last year.
Syscap currently has £31m of outstanding requests for funding compared with £22m this time last year.
Businesses are under increased cashflow pressure with the double whammy of the tax deadline and last week’s VAT increase.
To add to the burden, many directors may have to pay the new 50p tax rate, leaving them personally out of pocket as well.
This comes at a time when banks are reducing overdrafts and putting tighter restrictions in place, as well as asking directors to personally guarantee loans.
Philip White, chief executive of Syscap, said: “The increase in VAT to 20 per cent will create serious funding difficulties for businesses. Many have to wait months before their clients pay invoices, so the VAT increase will hit them particularly hard. January will be a squeeze for many of these companies.
“HMRC has been gradually making it harder to access its Time to Pay scheme, which has been a vital lifeline for cash-strapped businesses over the past two years. Shunned by the banks and HMRC, businesses are increasingly looking for alternative sources of funding, he said.
He added: “Although HMRC currently will not force a business to sell its 'essential assets' to pay a tax debt, it may expect them to sell more liquid assets. A poorly timed sale of assets could cost a business dearly.”
According to Syscap, HMRC now expects businesses, including professional firms, to sell 'non-essential assets' to pay their tax bills. It claims HMRC is also becoming more reluctant to extend credit once existing Time to Pay agreements have come to an end.
“Normally, businesses would just go to their bank, but many small companies in particular are finding that the bank they have been with for years is no longer interested in lending at a sensible rate, or that they want to tack on huge arrangement fees even for small loans,” said White.
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