Businesses in trouble should contact HMRC

Small and medium-sized businesses having a rough time due to the current market conditions have been advised to contact the tax man in order to avoid any penalties.

Cash-flow problems are currently affecting thousands of businesses and some may be having problems paying their quarterly tax bills, risking the prospect of getting penalised by HM Revenue & Customs (HMRC), reports the Evening Telegraph.

However, according to City accounting firm Rawlinsons, businesses can avoid this potential pitfall by simply contacting HMRC and explaining their situation.

"The first time you are late making a payment of VAT it is possible that no surcharge penalty will be payable," the firm said.

"But after that, any further late payments will trigger surcharges rising from 2% to 15% of the VAT outstanding."

The firm urged businesses to look at the options available or consider special schemes like cash accounting or the flat rate scheme.

Independent financial advisors can help businesses weigh up their options.