As we approach the tax return deadline, businesses are faced with the cash flow challenge of having to settle their upcoming tax bill. While most will settle in full and on time, there are plenty of reasons why businesses may be unable to settle their tax bill in full.
These reasons can be either positive opportunities or cash flow challenges, but ultimately require businesses to look at ways to reduce the impact of their tax bills.
Cash flow pressures can be caused by a variety of factors, including customers taking longer to pay, suppliers changing terms, increased costs or an unexpected bill. Opportunities can include increased turnover, new customer wins, increased staff levels or capital expenditure.
In the first instance, businesses should approach HMRC for a Time to Pay (TTP) arrangement, whereby a repayment plan is formally agreed with HMRC to repay the outstanding bill over a number of months. This is usually the most cost-effective way of spreading the liability.
Should HMRC be unable or unwilling to support this request, businesses can utilise specialist funders to borrow the amount required to settle their tax bill.
There are a number of specialist lenders in the marketplace, providing funding for tax or VAT bills, allowing businesses to spread the cost of these bills and reducing the cash flow impact of settling in full.
Typically loans can be arranged for a maximum of 12 months for tax liabilities and 3 months for VAT bills, meaning the outstanding debt is cleared before the next one becomes due. Businesses can then decide whether to renew their facility or revert to settling bills in full once the lending has been repaid.
As with all lending, it is important to consider the overall costs, which will likely include arrangement fees and interest, as well as any security required to support the lending request. In all situations, businesses are advised to seek advice from their professional advisers to review their options and decide on the most appropriate way forward.
This year HMRC is again waiving late filing and late payment penalties for one month, due to the pressures of the pandemic, though it is still advisable for taxpayers to get their tax returns completed and filed by 31 January 2022 so they know how much tax is due in good time, avoid late payment interest; and give themselves plenty of time to arrange payment plans if required. Read more.