The collapse of MG Rover may benefit suppliers operating in troubled sectors in the future, according to accountants PKF.

Prior to the car-maker’s demise, suppliers who provided goods for companies which went into receivership faced a long wait to reclaim the VAT they had already paid to the Government for such products. This is because the tax authorities required the VAT to be paid immediately on delivery, rather than when the customer actually met the invoice.

However, when MG Rover collapsed, the Government stepped in immediately to ease the cashflow of small suppliers in this situation by allowing the VAT to be reclaimed immediately.

Simon Littlejohns, tax partner at PKF, explained: ‘The current VAT regime means that suppliers have to pay VAT on goods and components they have invoiced the customer for, even though they have not been paid themselves.’

The accountant is calling for the temporary relief given to MG Rover’s suppliers to be made permanent for businesses caught up in these problems.

Meanwhile, European VAT specialist Cardvat has pointed out that the tax authorities of many European countries should also speed up their processes when refunding VAT to companies based in the UK. Managing director Kerrison Pell-Stevens says it takes three to four months to reclaim VAT in France and up to ten months in Italy.

He adds: ‘by knowing how to submit a claim properly, a business could save months in time to recover outstanding VAT payments, which are due to it. In the case of small businesses which may have cashflow issues, this could make the difference between surviving or not.’

The introduction of online systems could improve matters, believes Cardvat.