New VAT penalty regime 2023

Protecting your Cashflow

Whilst the UK Government have announced an unprecedented amount of support for businesses during this global pandemic it is widely reported that the vast majority of businesses may run out of cashflow within weeks and before many of these support packages can be accessed. So what can you be doing to protect your cashflow now?

Here are some handy tips

1 – Know your current position, who owes you and what you owe. Make contact by phone and see what arrangements you can come to. Conversations may feel awkward but remember they in turn will be speaking to their own customers and suppliers as well. We are all in this together.

2 – If you are still operating in some capacity then make sure invoices are being sent out as frequently as possible. Check where your customers finance team are. There is little point in sending out an invoice to an empty office as this will only delay payment. Note most online accounting systems allow for invoices to be emailed direct and will even show a trail of when that email has been opened.

3 – Keep in contact with your customers, consider offering some form of discount for early payment and make sure you are chasing payments as they are becoming due.

4 – Review your fixed and variable costs. What savings can be made? Are there subscriptions that could be put on hold for a few months? Make sure you are prioritising the necessary expenses and deferring any luxuries.

5 – Contact your utility providers, your demand is very unlikely to be at the same level for a few months, is there a cheaper tariff you could be on? Will they consider a payment plan?

6 – One of the biggest fixed costs for many small businesses is rent. Be up front and make contact with your landlord. The government have announced that commercial tenants who cannot pay their rent due to COVID-19 will be protected from eviction. Landlords are also in the same position and the last thing they would want would be to lose an otherwise excellent tenant.

7 – The Government is providing funding for Local Authorities to support all small businesses that already pay little or no rates because they receive Small Business Rates Relief, Rural Rate Relief and tapered relief. Eligible businesses will receive a one-off grant of £10,000 to meet ongoing business needs. Check with your local authority what you might be entitled to.

8 – VAT deferment is in place for all payments due from 20th March until 30 June 2020. If you want to take advantage of this deferment then make sure any direct debit is cancelled before the return is submitted. VAT refunds will be processed as normal so make sure your accounts are being maintained regularly and returns are submitted without delay.

9 – VAT. Consider cash accounting, which moves the date VAT is paid to HMRC from being date of invoice to date of payment.  If you are over the £1.35m threshold for using cash accounting, consider, if only temporarily, the issuing of pro-forma invoices (requests for payment), which increases your admin but gives the same result as cash accounting.  Pro-formas don’t create a tax point until they are paid, so if your customers aren’t paying you, you aren’t paying HMRC.  In addition, consider if a customer may go under and leave you with a bad debt, although you can reclaim VAT back on a bad debt, you have to wait 6 months.  If you use pro-forma invoices for at risk customers, you are not paying over VAT to HMRC until you are paid, if you’re not paid, neither are HMRC.

10 – HMRC have published details of a specific Time to Pay service set up to help those with existing or imminent liabilities which may include self assessment, VAT, PAYE or Corporation Tax. Arrangements will be agreed on a case by case basis and will be tailored to individual circumstances and liabilities. Open Monday to Friday 8am to 4pm 0800 024 1222

11 – Assistance with the payment of employees will be available via the Coronavirus Job Retention Scheme. Detailed information and FAQ’s can be found here.

12 – The Coronavirus Business Interruption Loan Scheme (CBILS) went live 23rd March 2020. There are several banks offering this scheme, and your first port of call should be to speak with your Relationship Manager. There has been criticism of the way this is being operated to date, the government are monitoring this and Rishi Sunak has announced further measures to maximise the support available to businesses. Detailed information can be found here.

For further information and advice please contact one of our experts listed on the right or if you would like us to keep you up to date by email please click this link to subscribe.

Back to News

Sign up to our newsletter

Join our mailing list to receive regular updates on
the news and events you need to know about.