1. Pause current tax payments: Businesses that are having difficulty in paying existing Income Tax, Corporation Tax or PAYE/National Insurance Contribution liabilities should contact HMRC and negotiate a Time to Pay Arrangement with them. HMRC have established a dedicated helpline to support businesses having difficulties with cash flow as a result of Coronavirus. More details on negotiating a Time to Pay Arrangement, to defer tax payments, can be found in our article here.
2. Corporation Tax – review current payments on account: Companies that are required to pay tax in quarterly instalment payments (QIPs) calculate their estimated payments based on forward-looking profit projections. Business owners should reforecast and consider whether future QIPs can be reduced or, if QIPs have been overpaid, business owners can request a tax repayment from HMRC. Business owners may consider extending accounting periods to capture losses to immediately offset against accrued profits to date. More details can be found in our article here.
3. Prior period tax losses: Companies and self-employed business owners should review their prior year tax returns. Previously carried forward losses may be better utilised in previous periods, possibly resulting in an immediate tax refund. Where this is possible, revised tax returns should be filed as soon as practical. Corporation Tax and Self-Assessment Tax returns can be re-filed within 12 months of their original filing date. For companies, the enhanced loss carry back provisions announced by the recent Budget should be borne in mind.
Losses can be carried back to the prior return and set against profits from that period reducing the tax liability.
4. Corporation Tax – current year tax losses: Companies that have suffered taxable losses in their current financial period, either as a direct result of Coronavirus or otherwise, should consider how best to utilise those losses. Shortening the reporting period may accelerate this process. Alternatively, HMRC may accept documented earlier year loss relief claims prior to financial statements being approved. Losses can be carried back to the prior return (and potentially to earlier periods following the recent Budget announcements) and set against profits from that period reducing the tax liability. Overpayments arising from this amendment will be refunded to the business by HMRC.
5. Corporation Tax – research and development: Have research and development (R&D) tax relief claims been maximised? The UK tax relief for qualifying R&D expenditure is very generous and, for qualifying SME’s that make losses, the loss can be sold back to HMRC for a cash tax refund. To qualify, a company must be a going concern and undertake an activity which overcomes difficulties using scientific or technological advances for which there were genuine uncertainties as to whether these could be resolved, and the solution is not commercially available, and is not knowledge that would be readily available to a competent professional. If you believe your business was undertaking R&D in prior periods, and you have not been claiming relief, you should review the position immediately to make sure you’re not missing out.
6. Capital allowances: Have claims been maximised? Additional claims to capital allowances in prior periods may immediately reduce the tax liability in the prior period, generating an immediate tax refund. This applies to both self-employed and corporate businesses. For companies, the benefit of the enhanced tax deductions of either 50% or 130% for expenditure incurred between 1 April 2021 and 31 March 2023 as announced by the recent Budget, may be available.
This quick guide covers some immediate actions that businesses owners can take today to help preserve their cash tax flow and manage their tax liabilities in the immediate future.
In our next article, we will consider what businesses owners may consider doing in the next one-to-six months to protect their businesses and take advantage of any tax incentives available to them.
Would you like to know more?
If you would like to discuss any of the above guidance or have other queries about how you can make the right decisions for the future of your business and your income, please contact your usual Blick Rothenberg contact or one of the partners to the right.
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