Struggling businesses ― how to ease cash flow

Produced by Tolley in association with TolleyGuidance consultant editor Craig Simpson of Bates Weston Tax LLP

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
  • Super-deduction and special rate first year allowance
  • 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
  • More...

Struggling businesses ― how to ease cash flow

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:

Super-deduction and special rate first year allowance

The super-deduction and special rate first year allowance (SR allowance) are temporary reliefs available to companies which incur qualifying expenditure on plant or machinery between 1 April 2021 to 31 March 2023. There is no upper limit to the level of expenditure that attracts these allowances.

The reliefs operate as follows:

  1. a super-deduction of 130% allowances is available on new plant or machinery that is not special rate expenditure, ie it would ordinarily qualify for the 18% main rate writing down allowance, and

  2. a first year allowance of 50% on new plant or machinery that qualifies as special rate expenditure, ie it would ordinarily qualify for the 6% rate writing down allowance. This is called the SR allowance

Where assets are disposed of, on which either of these reliefs were claimed, there will be a balancing charge on disposal. The calculation of the balancing charge is different depending on which relief was originally claimed.

For more details, see the Super-deduction and special rate fi

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