What tax planning can you do to help in a crisis?

During the coronavirus crisis there are some important tax planning measures you can take to help your business weather the storm, as Terri Halstead explains. In an exceptionally uncertain world, where I suspect most of us feel as though an awful lot of things are out of our control, it can be reassuring to find something that is within it; and tax planning is one of those things. The government has made it clear it will do 'whatever it takes' to support businesses and individuals through this downturn, but it’s sensible to have an overview of measures you can take to put yourself in the best position, tax-wise.  

Negotiation is key

Monitoring your expenses has never been more important. Many of you will have taken the opportunity to use the government’s furlough scheme to help you keep hold of staff without making redundancies. Alongside staff considerations, try to cut as many costs as you can. Speak to your landlord to try to get a rent reduction. Go through your P&L account to see what’s in there and if there are any rates holidays, fees or payment terms that you can renegotiate so that, perhaps, instead of paying a regular supplier 100% of the invoice within 30 days you pay 50% in 30 days and the remaining 50% within 60 days.  

A referral for deferral

On tax side, businesses will not have to make VAT payments due in the period from 20 March until 30 June 2020. They will be given until 31 March 2021 to pay any liabilities that have accumulated during the deferral period. Deferred amounts will not be subject to interest or penalties. The deferral relates to payments which are due in the period from 20 March to 30 June. It is when the payment is due, rather than the period for which the return is made which is relevant. It applies to payments made monthly or quarterly and covers payments on account. This applies to all businesses, regardless of size and it applies automatically so businesses do not have to apply for the deferral. VAT returns will still need to be submitted on time. You can also defer your corporation tax through HMRC. For the self–employed, income tax self-assessment payments due on the 31 July 2020 can be deferred until the 31 January 2021.  

Company cars

With the Government Coronavirus Job Retention Scheme (CVJRS) now extended to the end of June. Furloughed employees who are higher rate tax payers (40 per cent) could make significant tax savings by handing back their company car to their employer. If the car is not available for 30 consecutive days or more the taxable benefit can be reduced, as the vehicle will not be accessible for private journeys during their period of absence from work.  

R&D repayments

If you think you’re in the position of getting an R&D repayment, you could shorten your year end and make the claim earlier than you would normally. The shortest period is six months. So, if your year end is 30 June and you normally get a significant payment, you could pull it forward to 31 March. The payment generally takes 30 days but it’s slowed down a bit under the current circumstances, so will probably be between 30 and 90 days.  

Help from HMRC

Businesses that cannot afford to pay tax bills as a result of coronavirus can approach HMRC to see if they will agree to a 'time to pay' agreement which would suspend debt collection. HMRC will want to discuss the business's specific circumstances. And don’t forget that HMRC has set up a dedicated helpline (0800 024 1222) to support businesses and self-employed people concerned about not being able to pay their tax due to coronavirus.  

We are here to help. Talk to our tax advisors about how tax planning in a crisis can assist your business and help with cashflow.