Many businesses are experiencing financial difficulties due to the Covid-19 pandemic. Trading out of these difficulties will require careful management over the coming months.
Planning ahead is vital. Set out below are six important tax issues to consider.
1. Employees on furlough: The Government has said that the Coronavirus Job Retention Scheme will remain open until 31 October 2020. From 1 July 2020, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of these staff. If you have furloughed employees, will this increase demand on your cash flow? Will you need to speak to your bank? Have you availed of relevant grants and Government support schemes? If you need help when considering these questions, information and advice is available from FPM’s Evolve Covid-19 Support Team.
2. Deferring VAT payments: You can delay paying VAT due between 20 March 2020 and 30 June 2020. This VAT liability must be paid on or before 31 March 2021.
3. Deferring 31 July 2020 personal income tax payments: You can defer your second payment on account until 31 January 2021 with no interest or penalties added.
4. Self-employed support scheme: If you availed of the Government’s Self-Employment Income Support Scheme for businesses adversely affected by Covid-19, is your business starting to pick up again? Will you be able to trade profitably when the scheme comes to an end? Again, if you need help when considering these questions, contact us.
5. Anticipated losses for companies: HMRC recently updated their instructions for claiming corporation tax repayments where losses are anticipated due to business downturn. Claims will be considered before the current accounting period has ended. As yet we do not know if this will be extended to sole traders and partnerships. Read More >
6.Digitalisation: If you do not already have access to up-to-date digital business records, consider implementing a real-time accounting system as this will greatly assist you when reviewing potential cashflow issues and anticipating losses.
Planning ahead for recovery
Bear in mind that income tax payments due on 31 January 2021 are based on business profits for the year ended 5 April 2020. So, the downturn in business experienced from April 2020 will not impact that payment. It may, however, give an opportunity to reduce your payments on account for the current year.
Three important questions to ask yourself now are:
- Do I have sufficient funds in place to meet these payments?
- Have I availed of all available supports?
- What steps can I take to identify and manage obstacles and opportunities on the horizon?
Addressing these questions will help you plan effectively for the tax year ending 5 April 2021.