Increasing numbers of firms are being refused the chance to defer their VAT payments under the Time to Pay scheme.
The Business Payment Support Service was set up to allow businesses that are struggling to meet their VAT, national insurance, income tax and corporation tax bills extra time in which settle their invoices.
New figures, however, indicate that HM Revenue and Customs (HMRC) refused £42 million worth of requests to defer VAT payments in the first quarter of this year.
That is the equivalent of 11.2 per cent of the total number of applications. The proportion for the same period last year was 5.3 per cent.
The data came to light after Syscap, the IT finance provider, used the Freedom of Information Act to secure details about the level of application refusals.
Philip White, chief executive of Syscap, described the news that the HMRC refusal rate has shot up as “worrying”.
Mr White said: “Figures showing GDP growth of 0.2 per cent show the economy is weak. More needs to be done to help, not less.”
HMRC recently introduced a new rule which means that firms seeking to defer more than £1 million in tax payment must first provide an independent business review.
HMRC has insisted that the process for approving or turning down requests has not been made more rigorous and that each application is judged according to the circumstances of the firm making it.