An estimated £12 million in tax penalties could be saved by Midlands businesses through the government’s new business support scheme, according to accountancy and tax firm Rabjohns.
Will Silsby, of Worcester-based Rabjohns, said: “With the tax payment deadline of January 31 looming, some businesses will already have realised they cannot meet their liability and now face paying interest on any late-paid tax.
“At an annual rate of 4.5 per cent, that may not sound too bad, if a liability of £5,000 is paid at the end of March instead of 31 January, the interest will only be some £37.
“However, the sting in the tail comes with the five per cent surcharge on any tax unpaid by 28 February. If a £5,000 liability is not paid until 31 March, combined interest and surcharge liability reaches almost £290, equating to a staggering annual interest rate of 34.5 per cent.”
He went on: “With around 200,000 businesses in the West Midlands, if 20 per cent of these were late paying an average of £6,000, the penalties could reach nearly £12 million.
“A vast proportion of these businesses will be small enterprises, to which high penalties will have a significant and damaging effect on the bottom line, and to add insult to injury, late-paying companies could face being blacklisted as a defaulter.”
“However, this year help is at hand from an unexpected source – the Chancellor’s Business Payment Support Service (BPSS), as announced in November’s Pre-Budget Report.
“For businesses having genuine difficulty in making payment by the due date, but which have good prospects of paying if given more time, HMRC is prepared to agree a payment schedule and exempt the late-paid tax from surcharge, so that the only liability is the interest.
“We would urge all businesses in this situation to take up the opportunity.”
HMRC statistics show that in the first six weeks since its launch, the service helped to arrange deferred payments in a total of 14,200 cases, with an average value of £15,750, and Mr Silsby estimated that around 1,200 of these would be West Midlands-based.