Thanks to government support funding such as furlough payments, CBILS/bounce back loans and council grants, we are seeing many businesses finding themselves in the position of being cash-rich.
While this may seem like a great position to be in, we are advising all our clients to be very mindful of the liabilities that they have ahead of them. We urge you to ensure that all of your future liabilities are fully documented and understood.
- Many businesses have deferred their VAT liabilities (for payments originally due in the period 20 March 2020 to 30 June 2020) which will now be due by 31 March 2021. In the recent Winter Economy Plan announcement by the Chancellor, this has been extended to allow the payment to be spread interest-free over a period of 11 months during the 2021-22 financial year.
- You may also have delayed your Corporation Tax, PAYE and NI payments. Please note that HMRC have not automatically allowed the deferral of these liabilities and if you have done so, then you must contact HMRC to arrange a ‘time to pay’ arrangement. Interest will be charged on these deferrals.
- Companies House have automatically extended all accounts filing deadlines by three months (for accounts due in the period 27 June 2020 to 5 April 2021). However, the Corporation Tax payment deadline has not been extended. Payment is still due at the beginning of month ten of your annual cycle.
- You may have received a rent or rates holiday. However, these payments will still need to be paid and we would recommend negotiating repayment terms with your landlords.
- The Government is setting up an online service for arranging payment plans for paying self-assessment tax liabilities of up to £30,000. Taxpayers can arrange to pay their deferred payment on account from July 2020, any balancing liability in respect of 2019/20 and their first payment on account for 2020/21 in monthly instalments over a period of up to 12 months to 31 January 2022. Interest will though be applied to any outstanding balance from 1st February 2021. We know that these payments are often made from the company (in the form of dividends) so this may be a further drain on your cash reserve.
- For personal tax liabilities greater than £30,000 if a Time to Pay arrangement is required it will be necessary to negotiate this with HMRC in the usual way.
- CBILS/bounce back loans will need to be repaid (please note that, due to the Winter Economy Plan announcement, in some circumstances, the total length of these loans has been extended to between six and ten years), with interest being charged once the first year has passed.
At the very least, we recommend that you set up a simple spreadsheet to keep a note of your future liabilities which will include both standard and deferred payments, with a clear note as to the amount and date due.
We can help you manage this using some simple cashflow forecasting tools which will give you a clear understanding of your cash position month by month.
More importantly please do not think this additional cash is available to spend now! You’re likely to owe it to HMRC or other creditors, so please be careful!
For further information or help with any of the above, please speak to your usual contact at RPG or call us on 0161 608 0000.
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