The UK200Group, the UK’s leading professional services group of independent chartered accountancy and law firms, is calling for government action now to put in place measures for the handling of billions of pounds worth of business borrowing as a result of Covid 19 which will be payable in the Spring of 2021.
The specific issue is how debts that have been deferred in 2020 are going to be treated by the government and their agencies. Without clarity many businesses will take preventative measures now in order to minimise the risk of being unable to pay the likes of deferred Income Tax, VAT and their Bounce-back loans. The most likely impact will be higher redundancies than might be necessary.
Specifically, many businesses and their proprietors are facing payments next Spring of:
- Income tax deferred from July 2020, now due on 31 January 2021
- VAT deferred from June 2020, now due by March 2021
- Bounce-back loans and CBILS have 12-month repayment holidays, and so payment will start in spring 2021.
The UK200Group is recommending the government consider a number of options including: the provision of a single consolidated business support loan owed to HMRC. Additionally to establish a procedure for loans repayments based on a criterion such as: average profits of the business for the last 3 years, the size of business and the size of loan.
Says Andrew Jackson, head of corporate tax, Fiander Tovell and Chair of the Tax Panel of the UK200Group; “Business is largely supportive of Government initiatives so far. But it is looking increasingly likely that an upturn is further away than hoped for and as a result those businesses that have needed to defer their VAT or take advantage of a bounce -back loan are unlikely to have the cash available in as little as six months to make payments.
“We are not proposing writing off debts, but we are calling for ways for businesses to manage their finances over a longer period, so that they don’t have to take preventative measures now which may be unnecessary, but most likely mean more redundancies”.