As the clouds continue to circle over Nadhim Zahawi’s tax affairs, it seems that UK business owners are having problems of a different kind.
Ahead of the 31 January tax deadline, some accountants have said they are seeing more business owners struggling to pay their self assessment and first on account tax payment this year due to the cost of living crisis, Covid loan repayments and a deteriorating economy after an already tough three years.
Their views, and advice to business owners who may be struggling, are below.
Chloe Moss, director at Rotherham-based Tunstall Accounting: “I am seeing a sharp rise in business owners struggling to make their January tax payments this year, especially directors of small limited companies who were not eligible for grants during the lockdowns. Rising energy costs and pressure to increase staff wages, coupled with the increased cost of living for business owners themselves, mean many are having to make difficult decisions when it comes to prioritising paying their bills. In my experience, HMRC is very understanding when a taxpayer has trouble making payments but it is vital to communicate with them and put a payment plan in place as early as possible, ideally before the payment deadline. If you do expect your earnings to be lower in the current tax year, you can apply to reduce your payments on account.”
Debbie Warburton, managing director of Penryn-based chartered accountants, GW & Co: “To be honest, many businesses have been struggling to pay their tax bills for the past couple of years. The SEISS grants for the self-employed caused major issues as quite a lot of clients were not expecting to pay tax on these. For limited companies, the Bounce Back Loans caused other issues as directors were drawing money from this to survive as they had no other funds coming in. As a result, we have a lot of clients with overdrawn loan accounts, causing more tax issues for companies already struggling. HM Revenue & Customs have been very supportive since COVID hit and the time to pay arrangements are working as people are still struggling to pay their tax liabilities when they fall due. There are also a lot of companies offering finance facilities to pay outstanding tax liabilities, but you need to shop around for the best rate.”
Kevin Drew, managing director of Derby-based accountancy firm, Ascentant Accountancy: “We are seeing an increasing number of self-employed clients who are not currently trading at the same level as the previous year due to the economic downturn, but are still expected to make the same level of first payment on account to HMRC based on previous earnings. This is creating huge worry and cash flow problems on top of already very stretched purse strings. There may be an opportunity to reduce these payments on account by arrangement with HMRC. However, if those payments do not cover the current tax year’s liability, there may be additional interest payable.”
Daniel Edwards, director at Doncaster-based d&k Accounting: “We implement a simple cash management system into the majority of our clients’ businesses, which means that they regularly save for their tax liabilities, so in the main they have more than covered their January tax liability. We have a couple of clients that need the Time to Pay facility but on the whole HMRC tend to be accepting of this. They understand the pressure businesses have been under in recent years.”