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There’s no denying Covid-19 has hit some sectors of UK industry hard. With loans, tax deferment and extended deadlines the government has done its bit to help businesses weather the storm. However, as we get used to the ‘new normal’, the day of reckoning is approaching. So, plan ahead and avoid a finance repayments crisis when finance and tax falls due.


Plan to survive

The UK is unlikely to bounce back quickly from the economic impact of the pandemic. The first quarter of 2021 will be particularly challenging. Businesses that don’t prepare in good time could run into financial difficulties.

10 top tips

So, what can you do? Here are our 10 top tips to help you avoid getting into trouble with finance repayments and ensure your business survives – and thrives:


  1. Take action now

Understand your obligations and make sure you meet them. Cashflow is typically the primary concern, so manage it. Plan for loan and tax payments, including deferred VAT, to ensure sufficient funds are available. Try to reduce your outgoings. Examine working practices to identify how best to make savings whilst retaining revenue.


  1. Repay loans

A loan is a lifeline, not free cash. Whether it’s a Bounce Back Loan, the Coronavirus Business Interruption Loan Scheme or a regional council finance package, pay it back as soon as you can. Establishing a regular, manageable repayments pattern will reduce the burden faster.


  1. Deferred payments

Don’t forget about them! If you file a Self-Assessment Tax Return and you have deferred your July payment on account it now falls due on 31 January 2021. On the same day the first payment on account for 2020/21 is due. You could also face a balancing payment for 2019/20. All become due on 31 January 2021! Failure to pay on time could result in interest charges or penalties. Check your tax account and earmark funds to settle your debts. 


If you’ve deferred VAT, it’s time to reassess. No, further deferment of VAT is permissible. So, if appropriate, reinstate your direct debit. This will minimise the chance of paying your VAT bill late and incurring a penalty charge. Deferred VAT payments due between March 20 and June 30 become payable on 31 March 2021. You will need to make a separate payment as your direct debit won’t cover it. For some businesses the deferred payments date will coincide with their regular VAT payment schedule. Remember, you’re expected to make this payment as usual – defaulters will be penalised.


  1. Reduce costs

Purchase costs can escalate, so check your spending. Then, negotiate hard to drive down prices on everything you buy. From raw materials and packaging to equipment maintenance and teabags, strive for the best deal.


  1. Lower overheads

There are always costs to doing business. That’s why it’s so important to monitor overheads and take action to reduce them whenever possible. With energy, insurance and telecoms services, businesses routinely overpay by £8.7billion a year (Accountancy Age). It’s easy to avoid this. Don’t allow contracts to automatically renew and shop around.


When commercial leases come up for renewal you’re not necessarily obliged to stay. Contract negotiations can require a delicate approach though, so seek expert advice. Similarly, with rent reviews, understanding your rights and the market are key to achieving the best outcome.


  1. Make a profit

A successful business is a profitable business. Longer term, operating from smaller premises and with a slimmed down workforce could help to secure a stable future. For now, review and trim any products and services that don’t add value. Focus on developing a core portfolio that turns a profit.


  1. Delaying tactics

Give yourself some breathing space by putting off capital investments. Could you wait a few months to buy new machinery? Why not keep your company vehicles an extra year? Prioritise what’s essential. Yes, staff training is important, but you can reschedule courses when there are fewer demands on your funds.


  1. Look into grants

Research the availability of grants and other incentives, such as business tax credits. As well as helping to build your business, they could ease cash flow issues.


  1. Establish a cash reserve

It may not be easy but try to get into the saving habit. Work out a plan with your accountant to put money aside regularly. You’ll then have funds to settle loan repayments and tax bills. Importantly, you’ll also enjoy greater peace mind. Building up a cash reserve makes it easier to cope in an emergency.


  1. Keep communicating

Keep communication channels open. If you’re struggling to pay back a loan, say so. Then work with your lender and accountant to prepare a realistic payment plan. Equally, give HMRC notice if you can’t meet a tax payment deadline. Ask about the Time to Pay (TTP) service.


Now is the time to plan how to meet your tax obligations and repay Covid-19 finance repayments. For advice call us on 01785 243276.

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