More than one in five (22%) SMEs fear they could be forced out of business over problems paying tax bills in the next five years, new research1 from Premium Credit, a leading provider of finance for businesses, shows.

Its study with SME owners and managers found nearly two out of five (39%) say they have missed up to four tax bill deadlines in the past three years, highlighting the need for solutions to help SMEs pay bills on time.

More than seven out of 10 (71%) firms said they would consider using a scheme enabling them to spread the cost of their tax bills for a small fee, while nearly three out of four (73%) said they were aware they could spread the cost of tax bills throughout the year with HMRC.

The research found SMEs are even struggling to get VAT and Corporation Tax returns in on time, which is particularly worrying given the launch of Making Tax Digital for income tax self-assessment returns, requiring individuals to submit four returns in a year.

More than half (55%) of the businesses questioned admit they have been late with filing a VAT or Corporation Tax return in the past three years, the research shows.

Missing tax payment and return deadlines can be expensive -- penalties and fines range from £100 for being a day late with a Corporation Tax return rising to as much as 20% of the unpaid tax. For VAT, fines for paying late start after payment is 15 days overdue and go as high as 15% of the amount of VAT not paid on time. Around one in eight (13%) questioned said they are very worried about fines from HMRC.

There is some good news – nearly half (44%) say they believe HMRC has become more supportive towards business owners compared with 31% who believe HMRC is getting tougher.

But the numbers fearing they may have to use HMRC’s Time to Pay (TTP) scheme which enables eligible businesses to pay tax arrears usually within three to six months is rising. Around 30% this year say they may have to use TTP in the next three years compared with 12% in last year’s study2.

Around a quarter (24%) of SME owners and managers say they have in the past worked for firms that closed or went into liquidation because of tax bills.

Jennie Hill, Chief Commercial Officer, Specialist Finance, at Premium Credit said:

“SMEs have had to bear the cost of tax rises as well as increases in the minimum wage and are feeling the strain when it comes to paying tax bills on time."

“SMEs clearly need help to avoid missing deadlines and getting tax returns in on time so as not to have to pay fines. Being able to spread the cost of tax bills into convenient monthly payments helps businesses to manage cash flow and invest in themselves.”

Steve Harris, Director and Co-Founder at Birmingham-based Central Finance added:

“When an SME business owner is in arrears with a tax bill it’s all too easy to fall into the trap of picking a short-term loan just to get by. That invariably means high interest rates and high monthly repayment loans.”

For further information on Premium Credit’s Tax and VAT funding proposition, please visit here.