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Kirk Rice Blog

Cash Flow Ideas For Struggling BusinessesWritten on March 11, 2021 by Kirk Rice LLP

Cash Flow Ideas For Struggling Businesses

Coronavirus has caused significant turbulence for businesses of all sizes. While the UK Government has introduced many measures to help, including the Coronavirus job retention scheme and self-employment income support scheme, now is the time to critically review your business's tax profile and see what measure can be put in place to help with cash flow.

Research & Development (R&D)

The R&D scheme is a Government incentive designed to reward companies who carry out Research and Development. This is a widely underused scheme, and the Government has committed to raising R&D investment significantly.

A common misconception is that the R&D scheme is only available to firms carrying out pure scientific research in a laboratory. R&D relief can potentially be claimed where a company is overcoming any scientific or technological uncertainty resulting in an overall advancement in that field.

The R&D scheme provides an enhanced corporation tax deduction in respect of qualifying expenditure. However, the most attractive feature is that loss-making companies can surrender the enhanced deduction for a repayable tax credit.

RESEARCH & DEVELOPMENT FACTSHEET

Staff incentivisation

In order to bounce back to profitability and growth, businesses need to retain key employees but at the same time may be finding it difficult to match salary levels paid elsewhere. An alternative to a higher salary is to introduce one of the Government approved share schemes such as Enterprise Management Incentives (EMI).

EMIs are typically aimed at small entrepreneurial businesses allowing share options to be granted to key staff on a tax-efficient basis. As well as the tax advantages, EMIs are an excellent incentivisation tool for employees who can benefit from any future growth and success of the business.

 EMI FACTSHEET 

Capital allowances

Capital allowances are valuable tax relief for businesses. In particular, the Annual Investment Allowance is available to all businesses and allows a 100% tax deduction for qualifying plant and machinery in the period. This allowance has been temporarily increased from £200,000 to £1million until 1 January 2022. Therefore, it is advisable to critically review capital expenditure incurred to maximise claims which can be made.

CAPITAL ALLOWANCES FACTSHEET

Tax losses

Where the business is recording a loss, it could be possible to carry this loss back against a profit recorded in the previous 12 months and claim a tax repayment. In this scenario, it is beneficial to be submitting the corporation tax return as soon as possible to accelerate the refund from HMRC and therefore improve cash flow.

CORPORATION TAX WHEN MAKING A LOSS

If you would like to discuss how you can improve the cash flow or business tax for your business please email info@kirkrice.co.uk or call 01344 875 000 to arrange a call with one of our team.

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Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.

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