LATEST figures released by Her Majesty’s Revenue and Customs show that overdue debt has risen to a record breaking £58 billion.
And Sheffield expert Adrian Graham warns that with the support measures put in place throughout the COVID-19 pandemic now coming to an end, HMRC is going to start getting much tougher on repayments.
During the periods of lockdown there were restrictions on the way HMRC was allowed to use is powers to enforce payment.
But Adrian, a partner in Sheffield business turnaround and insolvency practice Graywoods, points out that the period of leniency is now over and that many companies will face a repayment crisis as they go into 2022.
An estimated £31.3bn of the overall debt is the result of the coronavirus VAT Deferral Scheme/VAT New Payment Scheme, which saw HMRC offering businesses the chance to defer VAT payments and also provided the opportunity to pay overdue VAT in smaller, interest free instalments.
An increase in the number of Time To Pay arrangements for businesses has also helped to swell the debt.
But Adrian warns that HMRC will now begin to look closely at where money is owed and how likely it is that it will be repayable.
“This is not the news that businesses that were struggling even before the pandemic want to hear,” he said.
“Many companies actually found that the various government support schemes throughout the periods of lockdown – including furlough, bounce back loans and deferments – at least gave them a breathing space and a chance to continue.
“Going into 2022, though, those businesses are going to find that the debt is being called in.
“It has already been established that many companies have only enough cash flow to keep them afloat for three months in even better times so the prospect of having to face repayment will push them over the edge.
“It is very sad that companies that appeared to have survived the pandemic will now face collapse but this level of debt is simply unsustainable and no government would be able to absorb it or write it off.”
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