VAT accounts for almost half of delayed business taxes

Firms have delayed paying £1 billion of VAT after reaching agreements with HM Revenue and Customs (HMRC) under the Business Payment Support Service.

The overall amount of deferred tax has now reached £2.5 billion, with some 141,000 small businesses struggling to meet their liabilities.

Of this, VAT payments represent 42 per cent, HMRC has confirmed.

The deferred VAT is equivalent to 1.5 per cent of the total VAT take of £64 billion that the government has predicted for 2009/10.

Under the Business Payment Support Service (BPSS), which was set up by the Chancellor in the pre-Budget Report as a way of helping cash-starved businesses cope with the recession, firms can ask to reschedule VAT, PAYE and NIC payments.

Repayment timetables tend to be for three to six months, but firms that are continuing to face difficulties can ask HMRC to re-negotiate time-to-pay agreements that are already in place. Whether HMRC agrees to an extension or an amendment will hinge on the specific circumstances of the business.

HMRC has said that the scheme will be kept in place while firms need it.

In the April Budget, the BPSS scheme was further extended so that businesses can factor in anticipated losses as they reschedule their tax payments rather than wait until the end of their accounting periods.