Businesses plead for more time to pay tax

Thousands of hotels, restaurants and other small businesses hit by the foot-and-mouth outbreak could collapse before the end of the year because they cannot afford to pay their outstanding tax debts. It is estimated that they owe £103m in deferred tax.

Financial observers are predicting a "credit crunch" in September or October, when banks will demand repayment, before waiting for businesses' situations to worsen during the winter.

After the onset of the disease in February, the Inland Revenue said companies could delay payments until the crisis was over. So far, 43,374 small businesses have asked for their debts to be deferred. The Inland Revenue said payment was generally deferred for only three to six months, but it would consider longer periods.

Barclays Bank said it had no plans to extend its six-month limit on debt repayment

Terry Franks, owner of the 10-bedroom Royal Oak hotel near Keswick in Cumbria, and spokesman for the Cumbrian Crisis Alliance, said businesses limited to one source of cash flow such as B&Bs that relied solely on "heads on beds" would find themselves in great difficulty.

A spokesman for the 160,000-member Federation of Small Businesses (FSB) said: "As far as we can see, the effects of foot-and-mouth will be felt for a long time to come, especially in the hospitality sector. All repayment deadlines should be looked at again.

"We are pushing for the cancellation of some debts. If the Inland Revenue and the banks take a heavy-handed approach now, all the benefits of their original action will be cancelled."

It is estimated that 8,000 of the FSB members who applied for loans were from the hospitality sector.

by Ben Walker