Business and coronavirus: Should I defer tax payments?
PUBLISHED: 11:15 08 May 2020
VAT, PAYE and corporation tax payments falling due can be deferred – but should you postpone paying them? James Shipp of Lovewell Blake explains.
This week is one marked clearly in accountants’ calendars, as payment of the first quarter’s VAT is due. Payment is usually non-negotiable but, as part of the government’s response to Covid-19, businesses can now defer payment until 31 March 2021. The question is: should you defer or should you make the payment now if you can afford to do so?
There will always be those who enjoy the peace of mind that comes from knowing tax bills are settled, while some business owners feel a moral imperative to pay their tax on the basis that the government’s Covid-19 response and the wages of NHS workers we clap for every Thursday are funded by that tax revenue.
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However, it would not be wise to pay now and end up with a cashflow crisis later in the year because the return to normality – whatever that will look like – is slower than hoped for. In the long run, ensuring the survival of your business and its ability to continue paying taxes and provide employment in subsequent years is more important.
Even if you have funds available now, think about how long you can survive if it takes months for trade to pick up. The costs of bringing staff out of furlough, restocking and implementing social distancing measures could all impact your cashflow in the second half of the year. That deferred tax payment could make all the difference.
If you decide to defer, you will need to have a plan in place for how you will pay the rolled-up tax liability all in one go in March 2021. For that reason, it’s worth considering all of the measures available – from the new Bounce Back Loan Scheme (BBLS) which are interest-free and payment-free for the first year, to taking mortgage and loan repayment holidays, to building up a ‘fighting fund’ to help your business survive.
For more information visit www.lovewell-blake.co.uk
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