40,000 UK companies have requested a tax payment extension
It has been revealed that a record 40,000 UK companies have asked the UK authorities for an extension during which to pay their tax liabilities. The move has surprised many people but will test the government's resolve and promise to assist companies throughout the UK. In total it is estimated that £650 million of corporation tax, VAT, PAYE, income tax and national insurance payments are due to the Treasury. Quite when the government will receive the funds remains to be seen with £350 million already deferred with the blessing of the authorities.
Interestingly a request by around 600 firms to defer their tax payments has been rejected by the UK authorities although we do not as yet know any specific reasons for the rejection. While there is a cost to the government for deferring the payment of various tax income streams it should be more cost-effective than introducing a new rescue package and the relevant costs which are incurred. However, the bottom line is that we are likely to see up to £1 billion "reinvested" back into the economy via tax deferments.
The corporate climate for UK companies has worsened over the last 12 months and is set to get very much worse before it gets any better. With banks unable, or unwilling, to assist with additional finance it seems as though the government will yet again need to step in.
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