‘Cash is king!’
However profitable you are, without access to cash (either physical or in an online account), you won’t be able to pay your bills and your business will be in trouble.
Luckily the Government is helping businesses to keep hold of their cash by allowing them to defer tax and VAT payments.
Income Tax
If you pay the majority of your tax via self-assessment, then usually you make two payments each year to pay off the previous year’s tax bill; one by 31 January (when your tax return is due) and one by 31 July.
The Chancellor has announced there will be no payment due by July this tax year. This allows more time to pay your tax bill. No application is required, and no penalties or interest will be charged in the deferral period.
VAT
All businesses are now able to defer their VAT payments for three months. This deferral will apply to VAT due in the period from now until 30 June and any accumulated deferral won’t need to be paid to HMRC until the end of the 2020/21 tax year. This deferral is automatic and no application is required.
If your VAT liability is usually paid by direct debit, you’ll need to cancel the direct debit mandate temporarily to make sure no monies are taken once the return is submitted.
Other taxes or payments not covered above
Where taxes are due and not covered by the deferments outlined above, it’s still possible to contact HMRC to negotiate a time to pay arrangement.
Typically, this will involve explaining to HMRC why the business can’t pay the tax due on time and outlining a plan to clear the debt in the shortest possible time, without the need for HMRC to use other means (think bailiffs or High Court petitions).
HMRC may ask the business to exhaust other means of finance before requesting a time to pay arrangement (such as the loan guarantee schemes outlined by the Government). However, there is also a desire on HMRC’s part to avoid putting organisations out of business in these difficult times.
Many more measures have been announced to help businesses survive this troubling period and the MHA Larking Gowen team has published details of these on our dedicated web page link If you need support with grant applications, accessing loan funding or cash flow modelling, please do get in touch.
Please speak to your usual MHA Larking Gowen contact or email [email protected]
Jordan Brown