Businesses can offset coronavirus-driven losses in order to cut tax bill

Businesses suffering lower revenues due to the coronavirus crisis may be able to offset their expected losses for this year against last year’s taxable profits in order to help reduce their tax bill. Read more: Businesses can offset coronavirus-driven losses in order to cut tax bill

Businesses can offset coronavirus-driven losses in order to cut tax bill

Businesses suffering lower revenues due to the coronavirus crisis may be able to offset their expected losses for this year against last year’s taxable profits in order to help reduce their tax bill.

That is good news for many struggling UK SMEs in the current climate, from accountants and business advisors, Moore.

Income for many companies has been severely impacted by the coronavirus outbreak and it is therefore essential that businesses find ways to improve cashflow in the coming months, if they are to survive.

Moore adds, many SME companies will be needing to make corporation tax payments in the forthcoming months, that are based on previous year’s taxable profits. However, if the business is expecting to make a significant loss in the current year, one option would be to consider offsetting these losses as soon as possible in order to reduce tax liabilities and to help with cashflow.

This is one option that a business may wish to look at, as an alternative to entering into an agreement with HMRC to delay their tax payments, known as a Time to Pay agreement. There have been substantial logistical issues in arranging Time to Pay agreements as HMRC has been swamped by enquiries.

Moore explains SME companies will need to pay their Corporation Tax liability within nine months and one day after the end of their annual accounting period. For example, a business with a year end of 31 December 2019, will need to pay their tax bill by 1 October 2020.

Moore adds, if the company was able by September 2020, to have a reasonable estimate of their 2020 annual taxable losses, then this information could be included on the 2019 tax return, thereby using the losses as soon as possible to reduce the tax due in October 2020. When the actual losses have been established, an amended return can be submitted. One note of caution would be if the estimated losses are too low, then the additional tax would need to be paid, and HMRC may charge interest on the balance.

Lucienne Parry, Partner at Moore, says: “Right now, one of the key items that matters for many businesses is preserving cash. Reducing your corporation tax payments is one way to do that.”

“For those businesses which have prepared management accounts and have a good understanding of their financial position, this can be a really simple way to improve cashflow. We are receiving more and more queries from clients about this.”

“It is crucial for businesses to be aware of all the different options available to help strengthen their financial position during this coronavirus crisis. Offsetting losses, Time to Pay agreements, and applications for emergency government loans should all be considered.”

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Businesses can offset coronavirus-driven losses in order to cut tax bill

Source : Business Matters More   

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Give every business a three-month rates holiday, demands CBI

All companies should be given a three-month business rates holiday as part of almost £16 billion of potential new aid, according to the CBI. Read more: Give every business a three-month rates holiday, demands CBI

Give every business a three-month rates holiday, demands CBI

All companies should be given a three-month business rates holiday as part of almost £16 billion of potential new aid, according to the CBI.

The business lobby group has called on the government to extend business rates relief beyond the retail, leisure and hospitality sectors to every company in England, Scotland and Wales, mirroring the temporary blanket suspension of payments in Northern Ireland.

Grants to businesses should also be extended, it said. Making the grants administered by councils available to more small businesses and larger ones outside the crisis-hit retail, hospitality and leisure sectors would cost about £10 billion, the CBI has calculated.

Widening business rate holidays to sectors including manufacturing, transport and retail supply for three months would cost £5.5 billion. That would make the total cost £7.9 billion, including the help to retail, leisure and hospitality, which have been let off payments for this tax year.

The relief could be extended from three months to six if times become harder. Dame Carolyn Fairbairn, CBI director-general, said: “This is a race against time, and the only winning strategy is scale, speed and simplicity.”

The government should also consider raising its guarantee to 100 per cent for coronavirus loans for small companies, the CBI said. Last night the Financial Times reported that the chancellor is preparing to offer such guarantees on loans to Britain’s smallest businesses, after pressure from Tory MPs and the Bank of England.

Loans under £25,000 are the hardest for banks to approve because of the high costs involved relative to their size. Only RBS is offering loans starting at £5,000 while HSBC last week launched loans from £10,000.

The Treasury said it had taken unprecedented action. “More than 435,000 businesses have so far claimed £3.75 billion to pay the wages of furloughed staff, and half a million firms have benefited from £6 billion of business grants. We’ve also implemented generous VAT deferrals and scrapped businesses rates.”

Read more:
Give every business a three-month rates holiday, demands CBI

Source : Business Matters More   

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