Small businesses have delayed the payment of taxes totalling nearly £2.5bn in an effort to survive the recession.
Figures obtained by the Observer from HMRC reveal that 141,000 tax rescheduling agreements have been reached in the past six months.
Rescheduling of tax is made through the Business Payment Support Service (BPSS), a scheme launched by chancellor Alistair Darling in his pre-Budget report last November.
The level of take-up of the BPSS is an indication of the cashflow problems impacting small firms hit by a lack of availability of bank funding and the continuing problem of late payment.
Steve Hughes, the British Chamber of Commerce's economic policy advisor, told the Observer: "Given the extreme conditions faced by businesses, this scheme is a welcome relief."
Stephen Alambritis, of the Federation of Small Businesses, said: "This shows the VAT man is up to speed but there is a feeling they are tightening the parameters. We don't want to hoodwink businesses [into this scheme] and then send in debt collectors to get the money back."
The newspaper reported that company turnaround specialists fear that the repayment of backdated taxes this autumn, combined with a possible rise in interest rates, will see a new wave of company failures blighting any fragile economic recovery.
Business leaders suggest the scale of demand from small and medium-sized enterprises for the BPSS could mean £5bn in tax delayed. A Revenue spokesman told the Observer that no limit has been put on the scheme.
In last April's budget, the chancellor amended the BPSS to allow businesses to have an anticipated loss taken into account as part of any rescheduling of their tax payments.
The government also says businesses will no longer have to wait for the end of their accounting period to have the loss taken into account when calculating what they have to pay.
© Crimson Business 2009