Business debt to HMRC hits £28bn per month
Corporation Tax, VAT, and PAYE arrears surge as firms delay payments to preserve liquidity
UK businesses owed HMRC an average of £28bn a month during the first quarter of 2025, newly released figures show, as economic uncertainty and rising operating costs force companies to prioritise cashflow over tax compliance.
According to data obtained under the Freedom of Information Act, unpaid Corporation Tax arrears stood at over £7bn each month between January and March. VAT liabilities averaged just above £12bn, while late PAYE payments, including National Insurance contributions, totalled around £8bn per month.
The figures come against a backdrop of mounting financial strain, with organisations contending with higher employment costs and the aftershocks of US tariff hikes on UK exports. January saw the highest monthly arrears, with over £8.7bn in unpaid PAYE and £12.5bn in VAT still outstanding.
Jason Kurtz, CEO of Basware, said the economic disruption was driving a noticeable behavioural shift:
“Our systems are detecting a substantial spike in invoice rejections as businesses scramble to renegotiate contracts, many shellshocked by tariff trauma of the last few weeks.
“In response to the economic turbulence, it’s likely companies are stockpiling their reserves and putting off paying tax liabilities in an effort to preserve cashflows.”
Kurtz warned that prolonged disruption and delayed payments could also create vulnerabilities across the supply chain.
“Late payments, especially those to organisations like HMRC, have a genuine impact on the supply chain and wider public services. It’s vital that organisations have rigorous AI-enabled visibility into all their accounts payable operations, to spot rogue invoices and ensure all financial liabilities are paid on time and in full.”
There are also concerns that the current volatility could be exploited by fraudsters.
Greg Watson, CEO of Napier AI, said:
“Increased economic uncertainty and volatility, which is being driven by global macro events like fluctuating tariffs, is creating opportunity for increased financial crime.
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“If we only catch it once the tax is overdue, we’ve already missed the opportunity to prevent financial crime in real-time, at its source.”
An HMRC spokesperson confirmed that the department was aware of the growing arrears:
“We take a supportive approach to dealing with customers who have tax debts, working with them to find the best possible solution based on their financial circumstances.”
