Partner Article

Businesses increasingly reliant on short term finance

The number of firms using short term finance to repay HM Revenue & Customs (HMRC) is increasing, according to lenders.

During the last tax year, income tax receipts hit more than £153 billion, after a major crackdown by HMRC.

This, alongside the credit squeeze and a volatile property market have resulted in a 30% increase in the number of companies and high net worth individuals relying on bridging loans to pay their tax returns.

Over the past year, more than 6 million warning letters were issued to individuals about the new tougher tax regime.

Fines of up to £1,600, automatic penalties of £100 and new £10 per day fines helped increase the Treasury coffers.

Chris Baguley, managing director of Bridging Finance Limited, said: “The mix of personal tax, corporation tax and VAT pressures are leading to a surge in demand for short-term finance from businesses that need rapid access to funding.

“When a tax demand is made it is often for an amount that companies can’t access immediately or within the required time period.

“We’ve seen a 30 per cent increase in the number of businesses requiring bridging loans to pay off corporate tax demands.”

An extra ‘late payment’ fine is due on August 1st 2012 – or a penalty equal to 5% of the tax due. This could be a significant amount if the individual is a higher rate taxpayer.

This was posted in Bdaily's Members' News section by Ruth Mitchell .