Taxation is at the top of the list when it comes to dealing with business finances and tax payment problems can be a big hurdle to overcome. But it seems many UK businesses feel left like the system is not working for them. In a survey carried out by the British Chambers of Commerce, small businesses revealed they think HMRC doesn’t provide enough support to deal with tax issues, with over half of the surveyed businesses finding the tax system unfair. So what should your business do if it’s struggling financially and finding tax payments difficult to make?
Assessing the Situation
If you think your business is struggling, you need to act – delaying will only make matters worse! Tax payment problems can be especially devastating, as delays in paying your taxes can lead to tax penalties and legal action. It’s important to know, however, that tax payment problems aren’t always a sign of serious issues within your business.
Assessing the situation will help you identify if your business is just facing temporary hiccups in cash flow or if they reflect a more demanding problem. Therefore, you should start by evaluating your cash flow and updating your financial forecast. These will help you identify the seriousness of the issue, leaving you to respond the right way.
Fixing Temporary Tax Payment Problems
If your business is facing a short-term problem with cash flow, then you should examine ways of raising money to pay your tax bill. When your financial woes are not a sign of a deeper issue, you’ll have a variety of options in terms of finding the funds to cover your tax bill. These include things like:
- Tightening control of working capital
- Delaying any non-essential expenditure
Fixing More Systematic Issues with Cash Flow
Your business might be struggling on a more systematic level and if you find tax payment problems to be a sign of deeper cash flow problems, you need to find ways of improving the situation. Our previous post on building long-term sustainability in your business can help you create stronger cash flow. It focuses on finding solutions to cash flow problems through:
- The creation of strong and clear payment terms and structures
- The injection of flexibility and encouragement
- The introduction of enforcement of payment terms
Taking Advantage of Ways to Reduce Your Tax Payments
Tax payment problems can be fixed by focusing on reducing your payments on account. By making your taxable income lower, you can improve your overall financial situation. There are different ways of doing this and the correct strategies depend on your business structure and type.
For example, self-employed can reduce payments on account if their taxable income is lower because their tax payments are based on past profits. It’s also possible to make voluntary advance payments and use a budget payment plan – reducing the outstanding tax liability as a result.
Other useful ways of reducing tax payments for different types of businesses include:
- Using the Construction Industry Scheme and applying for gross payment status as a subcontractor
- Using a deferment account or holding imported goods in a customs warehouse until needed if you are an importer
- Getting a discount on business tax rate as a small rural business
Contacting HMRC and Negotiating Time to Pay
When you are facing tax payment problems, contacting HMRC is crucial. Their business payment support service is designed to help businesses that know they cannot pay the tax bill before the deadline. It is possible to negotiate a new payment date and schedule as long as you can show you’ll be able to ultimately pay the tax bill in full. You need to be aware that interest will be charged on late payments so you want to pay as much as possible towards your outstanding tax liabilities. However, if you contact HMRC before the tax payment is due and negotiate a new payment agreement, you don’t have to worry about any other tax payment penalties.
Preparing for Insolvency
If your business faces more than just tax payment problems and you are finding it hard to make any payments, it might be time to prepare for insolvency. When your business survival looks bleak, voluntary winding down of operations can be the easiest option. This might not always mean your business has to stop operating completely, as we’ve explained previously. You could benefit from placing the business in administration and allowing yourself to gain back control after things improve.
Getting Help with Tax Payments and Financial Planning
If your business is struggling and you are finding tax payments troublesome, getting outside advice can help. A good accountant or financial advisor can provide a fresh approach to your financial situation, identifying problems and solutions that fit your specific business circumstance. You don’t want to face your problems alone and working with accountants can boost your financial situation even if your business isn’t dealing with serious payment problems. Proactive approach to money management is always better than reactive – you don’t want to act only after the problems are big enough but make sure you are on top of your financial situation at all times.
At Devonshire Green, we have the expertise to work with your business and identify solutions that work for you. We can help take out the stress of financial management and ensure you’re able to navigate the tax jungle in style. Contact us today to talk about your business and the ways we can help you.