Direct Investments

COVID-19: Financial support and tax tips

Malcolm Holloway of EFM and Lee Humble and Alastair Wilson of MHA Tait Wilson offer some straightforward financial advice to help businesses through these tough times.

  1. Banks like businesses to be methodical – if you are seeking funding, ensure you have a plan in place. It’s not enough to show that there is still demand for your product, you need to consider the impact on suppliers and end users. Showing that you have thought through these different factors will help you build confidence with the bank.
  2. But be sure debt is the right option – even if the bank is willing to lend, you will have to repay the loan at some point. Are you comfortable with that? Similarly, many government support schemes are effectively loans or deferrals and will have to be repaid by the end of March next year in most cases, though if you are taking on a CBIL (Coronavirus Business Interruption Loan) you can try to dictate the term.
  3. Take a VAT holiday – businesses can defer VAT payments, but you do still need to file your VAT returns and remember to cancel your direct debit! The VAT holiday is only automatic for those who don’t make ‘payments on account’ (advance payments). If you do pay VAT in this way, you must apply to HMRC.
  4. Consider other ways to cut your tax bill – use other tax reliefs to offset the liabilities you are building up. R&D tax relief could become more important in these times. If you think you could claim VAT bad debt relief, talk to HMRC now. If you are paying corporation tax in quarterly instalments, the forecasts you used may now be unrealistic.
  5. Get your accounts done – claiming tax relief might be difficult otherwise. Some businesses could accelerate their year end to crystallise claims and reduce liabilities, but if you use this option, don’t change the year end in such a way that you can’t get another one in before next March to mitigate PAYE.
  6. Ask about small business rates relief – if you think you qualify for a grant enquire now or you could miss out. Be aware that a lot of the guidance is quite new and there is some confusion, for example about the definition of retail.
  7. Think about your staff – while everyone is looking to preserve cashflow, don’t overlook the human element. Always consider the impact any decisions will have on morale and long-term productivity.