Struggling businesses ― how to ease cash flow

Produced by Tolley in association with TolleyGuidance consultant editor Craig Simpson of Bates Weston Tax LLP
Struggling businesses ― how to ease cash flow

The following Owner-Managed Businesses guidance note Produced by Tolley in association with TolleyGuidance consultant editor Craig Simpson of Bates Weston Tax LLP provides comprehensive and up to date tax information covering:

  • Struggling businesses ― how to ease cash flow
  • Specific coronavirus measures
  • Maximising capital allowance claims
  • Structures and buildings allowance (SBA)
  • Maximum annual investment allowance (AIA) and reduction at the end of the year
  • Fixtures in buildings
  • Research and development (R&D) tax credits
  • Carry back losses
  • Terminal loss relief
  • Time to pay arrangements
  • More...

The escalation of the coronavirus (COVID-19) outbreak and the global response of all Governments to the crisis has caused significant turbulence. Travel restrictions, social distancing measures and large-scale quarantines are all having significant impacts on individuals, businesses, the employed and the self-employed. OMBs may be struggling to maintain their cash flow and could be looking to obtaining debt from outside sources. This guidance note provides a summary of tax areas that can be reviewed with your OMB corporate clients that can help with cash flow and accessing funds.

Specific coronavirus measures

The Government has introduced many measures to help OMBs that are corporate, sole traders or partnerships, including:

  1. Coronavirus job retention scheme (CJRS)

  2. Self-employment income support scheme (SEISS)

  3. VAT deferral

Maximising capital allowance claims

Capital allowances is a valuable tax relief for OMBs, and maximising any claims can help improve cash flow. Specific areas to review are as follows:

Structures and buildings allowance (SBA)

From 29 October 2018, expenditure on constructing a non-residential building or structure, or in certain cases, expenditure on acquiring such a building or structure, qualifies for an SBA. An SBA is given at an annual rate of 3% of the qualifying expenditure on a straight-line basis over 33 and 1/3 years, as a deduction in calculating the taxable profits of a trade or other qualifying activity.

As any SBA claimed will be clawed back on a sale of the building by the adjustment of the sale proceeds by the amount of SBA claimed, the tax relief is essentially a cash flow benefit, but this could be beneficial in the short term. In the longer term, it may be that the property is sold at a loss and therefore claiming an SBA may give the benefit of a revenue deduction in current years with a reduced capital loss in future years.

For more details, see the Structures and buildings allowance g

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