Business Tax planning vital to maximise cashflow at this tricky time

Mary Schofield

With post-Covid cashflow the number one issue for many businesses, now is the time for some judicious business tax planning.

Whilst the freedom to trade is slowly being restored to many businesses which saw activity slow down or grind to a halt during lockdown, ensuring they have the cash to be able to carry on is the number one issue facing many firms right now.

Whilst the various government initiatives have undoubtedly helped, these are now starting to wind down: employers will be asked to contribute towards the cost of furloughed workers from 1st August, and while VAT payments due between 20th March and 30th June can be deferred, those due after that date must be paid on time.

Alongside this, businesses which paused during lockdown will find themselves having to restock, bring workers back and generally ramp up productivity, probably before the necessary resumption of full trading activity.  It’s always true, but never more so than now: cash is king.

Whilst bounce-back and business continuity loans are available, they assume eligibility, and many carry a cost which battered businesses may struggle with.  For many, a simple reorganising of their business tax affairs may give them an immediate cash boost without too much hassle or cost.

Deferring business tax payments doesn’t mean they disappear completely, but it does give a chance to replenish the coffers by trading before having to pay them. 

As well as the VAT payment deferral and the much-publicised business rates holiday, HMRC is more than ever open to making Time To Pay arrangements for things like corporation tax.  If your business is likely to make a loss this year, deferring those payments could mean that you are able to offset them against that loss, and in effect not have to pay them at all.  That means getting your year-end tax return done as soon as possible so that you can set the loss against any existing liability.

If cashflow is tight, talking to HMRC about Time To Pay is probably the best advice of all: you are likely to find a sympathetic ear.  But make sure you talk to them about any reliefs or rebates you may be due, otherwise you may find these offset against outstanding liabilities, even where Time To Pay arrangements are in place.

Equally important is to make sure that you are taking advantage of any tax reliefs you may be due, such as R&D tax credits, capital allowances, and indeed offsetting any losses from previous years’ trading.

Business taxes are often regarded as some of the most urgent things to pay, but right now most businesses should be ensuring the first draw on whatever cash they have are those payments which will allow them to trade, and build up their reserves once again.  Many sectors are finding that this is happening more quickly than they expected (although some, like hospitality, are still finding it tough).

Ensuring you are taking advantage of the various government initiatives, talking to HMRC about Time To Pay arrangements to defer tax payments, and making sure you are taking advantage of any reliefs or allowances are all part of vital business tax planning, which right now could tip the balance towards your business surviving.

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