30% hike in companies using short-term finance

NORTH WEST companies are turning to short-term finance to pay off tax demands by HMRC, according to local lenders.

Income tax receipts hit an all-time high of more than £153bn in the last tax year and HMRC has issued more than 6 million letters warning people that they face a tougher penalty regime.

Fines of up to £1,600, automatic penalties of £100 and new £10 per day fines all help increase the Treasury coffers and from August 1, an extra ‘late payment’ fine, or a penalty equal to 5% of the tax owed, is due.

This crackdown by the taxman, along with credit squeezes by the banks and a volatile property market has led to a 30% surge in companies and high net worth individuals using bridging loans to pay tax returns, according to one lender.

Chris Baguley, managing director of Manchester-based Bridging Finance Limited, said: “The mix of personal tax, corporation tax and VAT pressures are leading to a surge in demand for short-term finance from businesses that need rapid access to funding.

“When a tax demand is made it is often for an amount that companies can’t access immediately or within the required time period… We’ve seen a 30% increase in the number of businesses requiring bridging loans to pay off corporate tax demands.”