British businesses are behind with VAT payments to HMRC to the tune of £2.6bn, due to clients not paying bills on time, according to research from finance firm LDF.
It found one of the biggest causes of late payments to the government is that smaller firms are struggling to collect cash from customers, leaving them unable to pay.
The total owed to HMRC has risen slightly over the past year, going from £2.55bn in 2014 to £2.58bn in 2015.
Earlier this month, it was announced the government is to shake up rules to tackle the growing issue of late payments to suppliers.
The government’s enterprise bill will direct small- and medium-sized enterprises (SMEs) to a mediation service to settle disputes.
Peter Alderson, managing director of LDF, said: “It’s important that tax and VAT bills don’t start to compete with plans for investment – businesses need to plan ahead to make sure they know how their upcoming tax liabilities are going to be covered, allowing them to ring-fence the funds they use for growth.
“This is a time when businesses should be able to make significant investments in staff and equipment as the economy grows, however late payment can make this difficult for a lot of SMEs,” he added.
Increasingly businesses are now choosing to pay VAT payments monthly rather than in four quarterly lump sums to reduce the impact on cash flow, LDF says.