Tax adviser Alan McCann has urged smaller companies to ensure borrowing problems do not hinder the prompt settlement of tax bills as those missing payments could be hit by annual interest and surcharges of 24 per cent.
“The credit squeeze may well be a blip, but it has a lot to do with confidence which is notoriously unpredictable,” said McCann, a director at DTE. “As a result, financial pressure could filter down and mean businesses have less cash than they might otherwise have anticipated. The upshot is that it has rarely been more important for businesses to have enough funds to meet tax bills within HM Revenue & Customs’ deadlines.”
Late payment could be especially costly for sole proprietors and business partners who pay their income tax and national insurance liabilities in two instalments on 31 January and 31 July.
Failure to pay on time triggers a daily interest charge equal to 8.5 per cent per annum. In addition, if payment is not made in 28 days, HM Revenue & Customs automatically levies a five per cent surcharge, with further surcharges six months later.
McCann added: “This means that if a business had not paid its 2005/06 bill, due on 31 January 2007, until September 2007, it would be charged interest and surcharges at an annual rate of approximately 24 per cent.
“Clearly, such a heavy interest cost should be avoided, particularly as the tax man does not grant relief against profits for any interest and surcharges paid.”
