Business Tax Reliefs Including R&D Tax Credits
As you move from the response phase towards the management phase of the pandemic, it is time to introduce longer-term strategies to help strengthen your cash flow.
Key areas to focus on:
You may already have deferred PAYE liabilities for three months, but when those liabilities are due in June, your business will face another cash squeeze.
For many, the solution will be to secure a more detailed VAT Time to Pay agreement with HMRC, supported by a cash flow forecast, repayment plan and evidence that other sources of funding have been exhausted.
This offers SMEs corporation tax relief for the costs of research and development (R&D). It’s an opportunity for many businesses to generate significant cash payments from HMRC, allowing you to:
The scope of R&D is wide, and the kind of changes that could qualify for relief include:
Claims can also be accelerated to help cash flow, with a potential turnaround time of six weeks between starting work and receiving the cash payment.
In this current accounting period, you could find yourself in a loss-making situation. Losses can be carried back and set off against profits of the preceding period, allowing you to receive repayments of last year's corporation tax – even if the current accounting period has not ended.
Larger businesses may also have the opportunity to reclaim quarterly instalment payments already paid.
Setting up an employee share option, or Enterprise Management Incentive (EMI), scheme lets you reward key staff members – helping boost loyalty – without an immediate cash cost to the business.
EMI arrangements have significant tax advantages for the option holder and the exercise of most employee share options also results in an immediate corporation tax deduction for your company.
Many companies are likely to need additional funding to get through this current crisis. Shareholder loans could be an option, or you could pursue further subscriptions for shares from existing shareholders or new investors.
If the conditions are met, the equity subscription could qualify for the Enterprise Investment Scheme (EIS), giving the investor 30% income tax relief on the investment and capital gains exemption on the ultimate disposal.
Pension schemes can be used in a variety of ways to support your business through the crisis.
Some pension schemes can borrow to buy commercial property from the business, providing a means of funding the company. Alternatively, owners could access 25% of their pension fund tax-free, helping them improve cash flow to support the business.
Additionally, in very specific circumstances, certain pension schemes can lend to companies.
We can provide support in all areas of tax, allowing you to make informed decisions about your tax position with advice that delivers sustainable, risk-managed, effective tax strategies for the long-term.
If you would like to know more about business tax reliefs and how we can support you in strengthening your cash flow, please don’t hesitate to contact us.
As a business leader, you may already be reviewing working capital and cash flow projections, running scenarios on profit and loss, balance sheets and cash flows with various degrees of interruption. It is important to review regularly to manage liquidity risk.
The Government’s Coronavirus Jobs Retention Scheme (CJRS) was introduced to help employers keep staff on their payroll, covering most of their salaries and reducing the risk of mass redundancies. Reboarding is the process of bringing your furloughed staff back to work, as the Covid-19 lockdown restrictions start to ease.
We understand that at this time, your business will be facing a number of unique challenges and that your time will be at a premium. You will most likely need to prioritise managing costs and adjusting operations to cope with a reduced workforce, while striving to survive and adapt.
We understand the importance of financial planning for you as an individual, and the impact that Covid-19 could have on your personal wealth – both now and longer-term.
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