Tax rules offer liquidity lifeline
TAX experts from Deloitte are urging companies large and small to use new and existing tax rules to a potentially priceless liquidity lifeline for 2009.
According to the business advisory firm businesses can increase free cash flow by ensuring they are taking advantage of all available tax reliefs as the global banking crisis continue to filter through the economy.
Richard Williams, a tax partner at Deloitte, said: “Good housekeeping and smart tax thinking could easily generate up to £50,000 of additional liquidity at no cost which is crucial for, say, a typical manufacturer now facing difficult times.
“There is a range of tax initiatives available to businesses to increase free cash flow. For example, companies should ask for a repayment of tax payments on account if there has been a downturn in business over the course of the year such that the initial profit forecasts are now looking overly optimistic.”
Mr Williams said that for smaller companies the last Pre Budget Report offered the chance for businesses to ‘claw-back’ an additional £10,000 to £15,000 in corporation tax for any firm that has been profitable in the past few years and now faces losses.
In addition, if companies are in the unfortunate position of having to lay off staff, payments in lieu of notice can be tax free for the individuals up to a limit giving them more money in their pocket and also not subject to Employer’s National Insurance for the company.
Ian Williams, director of policy at Leeds Chamber of Commerce, added: “It is vital every company protects its cash flow at present, and these steps are the first any business should take in 2009 to improve liquidity and minimise the threat of underfunding to its operation.”
“These measures could generate hundreds of millions of pounds worth of much needed additional liquidity and crucially they can strengthen the balance sheet of a business.”
