VAT bonds threaten to cripple hospitality businesses
Leading hospitality industry accountants, Volensis, are predicting that many licensed businesses will be forced to close through cash flow problems, if the HMRC continue to press ahead requesting VAT Bonds.
The Bonds are requested of businesses that have failed to pay or been late payers, of their VAT bills. “These Bonds are essentially security deposits and have become more prevalent since the HMRC were removed as preferential creditors back in September 2003 for VAT and PAYE explained Odette Gibson, MD at Volensis.
“What’s happening is the HMRC are looking at businesses in certain sectors including the hospitality sector, typically those who deal in cash and who, in their opinion, are either mis-managing the business and/or using funds that should be allocated for VAT, for other means – using the revenue as a bank if you like. In a recent case I heard of a bond of £50k being requested from a business, that’s on top of their £40k arrears – that’s cleared funds that are ring-fenced upon which the HMRC have first charge and it doesn’t stop there, the bank will apply charges to facilitate this. In the current climate, I’d be surprised if many businesses can do this without having a crippling effect on cash flow or worse”.
Odette issued a further warning: “Once a business has been issued with a request to provide a security deposit, it is a criminal offence to trade without providing it”.
“It’s not all bad news, the HMRC will listen to requests for staggered payments, but this will often come down to individual cases, previous history, and in most cases, the way your accountant handles the request through the presentation of trading details alongside a clear path on how repayments will be met.” said Odette.
For more information about Volensis, go to www.volensis.com or call 020 7267 3355
FOR PRESS ENQUIRIES
“Instinct is the gift of experience”