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VAT rise hits business cash flow

Almost a third of small businesses say they will need extra funding to cope with the increase in VAT, a study finds. According to research from new bank Aldermore, 35 per cent of 292 businesses surveyed say the VAT hike will strain their cash flow.

Businesses usually have to pay VAT to HM Revenue & Customs before they have received payment from customers, meaning that the rise will eat into their working capital, says the bank.

Philip Monks, chief executive of Aldermore adds, ‘Late payment of invoices is already a serious concern for many SMEs and the prime cause of their cash flow problems. The temptation for clients of SMEs to sit on invoices longer to shore up their own cashflow in response to the VAT rise will be difficult to resist.’


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