We understand that this is an uncertain time for everyone, whether a start-up, sole trader or FTSE 100 company. The coronavirus pandemic and lockdown have had a far-reaching and unprecedented impact on a wide range of businesses. There is no definitive answer as to how to operate successfully at this time. Our specialist team of tax lawyers are committed to understanding the current changes and providing strategic advice for our clients, which focuses on their individual circumstances.
The below provides an overview of some of the tax initiatives and reliefs which are available to help businesses at this time. As has been well publicised, the government has also announced a number of other new initiatives (such as the Coronavirus Job Retention Scheme): please refer to our COVID-19 Hub for more information about these programs.
Business rates holiday for 2020 - 2021 tax year for retail, hospitality and leisure businesses in England
You do not need to take any action.
VAT deferral
If you are a UK VAT registered business and have a VAT payment due between 20 March 2020 and 30 June 2020, you have the option to defer the payment until a later date, currently 31 March 2021, without incurring interest or penalties.
HMRC Time to Pay
If you are experiencing financial difficulties, more help is available from HMRC’s Time to Pay service. Contact HM Revenue and Customs (HMRC) as soon as possible if you have missed your payment.
SME R&D tax relief
On top of being able to deduct R&D expenditure before calculating taxable profits, additional tax relief is available to small and medium enterprises carrying out R&D activities. You can (subject to a few limitations) deduct an additional 130% of their R&D costs before paying Corporation Tax on your profits.
R&D expenditure credit
Larger companies and those not entitled to the SME R&D tax relief can claim R&D expenditure credit, which enables a company to claim a tax credit for 13% of R&D expenditure (on top of already being able to deduct 100% of R&D expenditure).
The Patent Box
A company can apply for a lower (10%) rate of corporation tax on profits earned from specific inventions (including patent inventions).
To be eligible, broadly, your company must make a profit from exploiting patented inventions or specific medicinal or botanic innovation rights. The patent can have been granted by the UK Intellectual Property Office, European Patent Office or most countries in the European Economic Area.
VAT: Bad debt relief
Taxable persons must account for output VAT on their supplies of goods and services. However, if the debt remains unpaid for at least six months from the later of the date of supply and the date the debt becomes due and payable, the supplier may be able to make a claim for a refund of the VAT element of the sum outstanding.
Making use of losses
Certain losses that your company has not used in any other way can be offset against profits in future accounting periods.
Broadly, your company could possibly carry trading losses forward to deduct from profits of future accounting periods as long as the trade continues.
Subject to restrictions, if your company has capital losses that are not used against capital gains in the same accounting period, they are carried forward and can be deducted from later capital gains (but not any other type of profit).
HMRC helpline
HMRC has set up a phone helpline to support and advise businesses and self-employed people who are concerned about not being able to pay their tax due to COVID-19. It is planned for the helpline to be operated by up to 2,000 experienced call handlers.
How can we help?
Burges Salmon's Corporate Tax specialists have experience dealing with a variety of tax issues in the current climate. Please contact John Barnett or speak to your usual Burges Salmon contact if you want to discuss any of the above initiatives or reliefs in more detail.