Saving for taxes
While our businesses have been able to maintain or increase profits there has been an unwritten acceptance that we will pay for current taxes out of future cash resources.
For example, if you are self-employed, payments on account for self-assessment taxes on current income are made two months before the end of each tax year and four months after the end of each tax year. And if payments on account are not enough to cover what is due, any balance owing to HMRC is payable some months after the end of the tax year.
Companies are required to pay tax nine months and one day after accounts and tax returns are drawn up.
There is a flaw in the unspoken assumption that funds will always be available to meet future tax payments. It arises if profits and cash resources are falling.
Unfortunately, COVID-19 disruption is creating these conditions for many UK businesses.
The present pressures on cash-flow preclude saving for future tax, but there will come a time when HMRC will come looking for their money.
HMRC have agreed to allow more time to pay and we may be able to help reduce tax due if there are losses available or if payments on account can be reduced.
If this is likely to be a problem for you in the coming months please contact us so we can help you consider your options.
Source: Other | 16-06-2020