Funding Options Criticizes UK Approach To Late SMB Tax Payments

HM Revenue & Customs

Alternative small business lending platform Funding Options has criticized U.K. tax authorities’ approach to small businesses that fall behind on tax payments.

Reports in AltFi said Funding Options argued that the approach by HM Revenue and Customs (HMRC) to late tax payments is “too aggressive,” citing the high number of applications HMRC submitted to shutter small businesses. The tax authority applied to close 4,160 businesses last year, reports noted.

That’s an 11.5 percent decline from 2017 levels, but still too high, the company said, adding that because of a slowing economy and late payment challenges, Funding Options said regulators should take a more “sympathetic approach” to small and medium-sized businesses (SMBs) that fall behind on tax payments.

“A key reason behind some businesses not being able to meet their tax payments on time is late payments by larger clients,” the company said, pointing to “tough trading conditions caused by Brexit uncertainty and slowing global economic growth” as additional points of pressure that may prevent a small business from being able to pay taxes on time.

The company is urging HMRC to allow small businesses more time to pay.

“HMRC continues to take a hard-line approach despite businesses facing touch economic headwinds,” said Funding Options Chief Executive Conrad Ford in a statement. “While HMRC has eased back from last year when they tried to shut down 4,700 businesses, it should be looking to give them even more leeway.”

At the same time, tax regulators are cracking down on tax avoidance as well. Reports noted that earlier this year, HMRC released a notice advising of its efforts to combat attempts to “avoid an income tax charge on distributions when winding up a company.” The regulator said it is also taking measures to target “phoenixism,” which involves a business owner’s attempt to use cash from a closing business as capital gains and not income tax, which is taxed at a higher rate. Those bosses then launch a new company that is similar to the previous one.