CORONAVIRUS: TAX STRATEGIES

Whilst a lot of businesses are in good enough financial shape to make it through the pandemic, there’s no standing still, and there are several tax opportunities that firms are likely to be taking advantage of in the coming months.
quote mark icon

We appreciate that a business often represents a lifetime’s work and just how critical a sale, or acquisition, can be.

Jon Miles

Tax Director

Share options/incentives

If you haven’t already done so, it’s a good time to consider share options or incentives for key staff. As workforces aren’t likely to be receiving pay rises or bonuses any time soon, share options in particular are a great way to help retain and motivate staff, as you rebuild and regrow the business, without putting strain on your cash flow.

Furthermore, with many company valuations arguably being lower than before the pandemic at the present time, share options are a potentially attractive and tax efficient option for rewarding staff for their efforts in the future, provided there is a genuine prospect of an exit.

Financial Year Ends

For businesses that either ceased trading during lockdown or found sales drying up, if there was a significant financial loss (but be aware of the impact from any furlough or grant support), then it may be worth extending your financial Year End to gain a tax cash flow benefit. This could be particularly relevant to those in the hospitality sector.

Whilst amending your Year End won’t reduce your tax bill, it could defer it by several months and thus, improve your cashflow. Each case needs to be considered on its own facts and the benefits need to be weighed up carefully alongside your professional advisor, as it isn’t worthwhile necessarily for all businesses.

R&D

With an enhanced Corporation Tax deduction (currently 130% of eligible costs for the SME scheme), R&D is an area that companies may be increasingly looking to take advantage of. The rules remain unchanged of course and there are strict criteria to meet, but it’s possible that more firms will be investing in innovation and/or more efficient processes to ensure they’re in the best position to come out of the crisis.

Contrary to popular belief, R&D isn’t the preserve of tech businesses. Whether the relief is available depends on the company’s exact situation, but generally, if the process being undertaken furthers technological or scientific knowledge, any registered UK company could potentially qualify. A good example of this in recent years was a local bakery which pioneered a new and more efficient process for making bagels.

Depending on the company’s financial year end, there will always be a delay in businesses receiving a cash benefit (as claims can only be made following the end of the financial year you’re claiming for), but it is still a win-win situation if you’re able to develop your business and get a cash boost at the same time.

 

For further information or advice on any of the issues raised, or for help with services like bookkeeping, cash flow management or payroll during the Coronavirus pandemic, please call us on 01225 325580, email info@richardsonswift.co.uk, or contact your usual client director.

Please note that this is only a summary of the main issues and should not be construed as advice.

Contact Jon  

Related services