Direct tax ideas to improve cash flow

In the current financial climate, cash flow is more important than ever and our tax team have identified the following ideas that could help you generate a tax refund or defer tax payments which will assist with your cashflow.

1. Research & Development – this is a valuable tax relief that can generate significant cash repayments from HMRC, if a company meets certain qualifying conditions. Companies are able to go back and refile last year’s previously submitted tax returns. If your year-end has recently finished, then you should consider accelerating the filing of your tax return to generate a potential repayment.
2. Carry Back Losses – If your company has made a corporation tax payment in the previous year, and you are now forecast to make a loss in the current period based on latest management accounts. It may be possible for the company to carry back these forecast losses to generate a tax repayment.
3. Capital Allowances – If your company has acquired a property or indeed incurred significant capital expenditure in recent years and not received advice from a specialist capital allowance adviser, it may be possible for your company to claim additional capital allowances. If this is possible, the additional allowances will be claimed in the tax computation, which could generate a corporation tax repayment.
4. Patent Box – This is a valuable relief that is available if your company owns Patents and these are incorporated in a product that you sell. The rules are complex, however, if the conditions are met the corporation tax rate applicable on the qualifying income will be 10%. In certain circumstances, this could result in a cash repayment.
5. Payment on Account reductions – both companies and individuals who are making payments on account of their current year tax liabilities should review these to consider whether they can be reduced and refunds obtains for payments already made.
6. Sheltering Capital Gains – if you have made capital gains in the current year to 5 April 2020 and have a share portfolio sitting at a loss, you may wish to realise some of the portfolio to generate a tax loss in order to shelter the tax which would otherwise be payable. Clearly, independent financial advice should be taken from you financial advisor before considering such a step. In addition complex rules surround the re-acquisition of shares by you or an associate and these need to be considered.
7. Deferring tax payments – HMRC have a dedicated helpline (0800 015 9559) for those who need to request further time to pay their upcoming tax bills. Our experience to date shows HMRC taking a positive and supportive approach.
8. Consider a change in Accounting Period – for both individuals and companies, there may be tax savings by changing your accounting period in order to take into account any losses that your business may incur over the next few months.
9. Averaging Profits – special rules apply for Farmers and those in creative works to allow profits to be averaged over a period of up to five years. If you are in these industries, you should review the application of averaging along with your tax adviser.
10. VAT – click here to see our VAT insight that could also assist you with cashflow in your business.