Tax ideas to improve cash flow

In the current financial climate, cash flow is more important than ever. The following ideas might help you generate a tax refund or defer tax payments which will assist with your cashflow.

Research & Development – this is a valuable tax relief that can generate significant cash repayments from HMRC, if a company meets certain qualifying conditions. Companies are able to go back and refile last year’s previously submitted tax returns.

Carry Back Losses – If your business has made a tax payment in the previous year, and you are now forecast to make a loss in the current period, based on latest management accounts, it may be possible to carry back these forecast losses to generate a tax repayment.

Capital Allowances – If your business has acquired a property, or indeed incurred significant capital expenditure, in recent years and not received advice from a specialist capital allowance adviser, it may be possible to claim additional capital allowances.

Payment on Account reductions – both companies and individuals who are making payments on account of their current year tax liabilities should review these to consider whether they can be reduced and refunds obtained for payments already made.

Sheltering Capital Gains – if you have made capital gains, and have a share portfolio sitting at a loss, you may wish to realise some of the portfolio to generate a tax loss in order to shelter the tax which would otherwise be payable.

Clearly, independent financial advice should be taken from your financial adviser before considering such a step.

Also, note the complex rules surround the re-acquisition of shares.

Deferring tax payments – The government announced that self assessment tax due by 31 July can be deferred until next January. Likewise, all businesses can defer VAT return payments which are due between now and 30 June until next March.

For other payments, contact HMRC to request time to pay.

Consider a change in Accounting Period – for both individuals and companies, there may be tax savings by changing your accounting period in order to take into account any losses that your business may incur over the next few months.

Averaging Profits – special rules apply for farmers and those in creative works to allow profits to be averaged over a period of up to five years.

If you are in these sectors, you should review the application of averaging along with your tax adviser.