Businesses using credit cards to pay tax bills

By UK CreditCards.com

The fact that many businesses are struggling to make ends meet during the ongoing economic downturn has been highlighted by new figures from HM Revenue and Customs (HMRC). The figures, which were obtained by Ashworth Law, show that an increasing number of businesses are turning to credit cards in order to meet their tax obligations. The findings underline the hardship many businesses are enduring and indicate that many need to look at ways to improve their cash flow.business cards

Credit card use soars between 2005 and 2006
Figures obtained from HMRC under the Freedom of Information Act show that the number of credit card payments made by businesses for tax bills rose from 6,083 in 2005 and 2006 to a staggering 365,221 transactions in 2009 and 2010. The amounts in question have also soared from just over £2m to almost £486m during the same time periods.

Unsecured credit preventing business failures
Mathew Cobley, joint chief executive of Ashworth Law, which requested the figures, suggested that credit cards have enabled many businesses to keep afloat during the financial crisis.

"If the Inland Revenue didn't accept credit card payments, then I am confident we would see a lot more businesses going to the wall," Cobley said in a news release.

However, Cobley warned that debts pose a serious threat to the future success of businesses and urged companies not to view credit cards as a permanent solution.

"Credit cards may be a short-term fix, but the message is that businesses need to have a proper credit control mechanism in place, so they have the money in the bank to avoid credit cards and the high interest rate that will continue to plague them," he said.

See related: 4 reasons to use a business credit card; Small firm bosses using personal credit cards

 

Published: 6 February 2012