Tax specialists at Haines Watts, national chartered accountants and business advisors, have unlocked £50 million of cash ‘locked’ in UK businesses – creating a lifeline for many in 2020.
The cash injection has supported businesses operating in manufacturing, gaming, construction and more, helping to sustain them through one of the most difficult trading years the UK industry has ever faced. Businesses include a construction company, where in under two months of working with Haines Watts, the team had identified £1m worth of reliefs going back two years which they were able to backdate and claim.
With £500k of that landing at the start of 2020, that money was able to go straight back into the business as working capital, with the company describing it as a ‘perfectly timed windfall’. The company had made R&D claims in the past, but the claims had not maximised all qualifying activity and so the amount available to them came as a huge surprise.
According to ONS (GOV.UK) many businesses in the UK only had cash reserves to last up to six months, with reduced trading and continued lockdown, cashflow continues to be one of the biggest challenges facing businesses right now.
In the December Bank of England Financial Stability Report, bank staff estimated that UK companies could face a cashflow deficit in the 2020–21 financial year of up to around
£180 billion, so what can businesses do to get in the best position possible to manage cashflow?
Jonathan Scott, Tax Partner at Haines Watts, said: “Over the last year business confidence has hit some all-time lows and as we now plan for 2021 there is still a lot of uncertainty. Lots of business owners are anxious as they look at Government support options and potential reforms to the tax system, however businesses could potentially get back five-figure sums in overpaid tax, or in backdated reliefs that they’ve not yet claimed and the amounts involved could be the difference between a business failing to weather the storm and future success.
“I’m speaking to a lot of business owners who are struggling. In lots of cases the business hasn’t explored or maximised all of the support that’s available to them, especially through tax reliefs and incentives.
“Since the pandemic started, we have helped clients to reclaim an average of £66,000 in research and development reliefs per company and across all reliefs and sectors, more than £50m in for businesses in 2020 alone.
“When cashflow is so restricted, margins are tight and businesses are still in recovery mode, as a focus I would urge all businesses to investigate any possible Government support and incentives and to make sure they are working with a specialist who is able to fully maximise reliefs.”
Scott said many of the available reliefs are targeted towards some of the sectors that have been hardest hit by the pandemic, including the creative industries and construction, where more than 50% of businesses saw turnover drop by up to 50% and 25% saw an even bigger impact in 2020 (ONS).
“We know how hard it’s been for businesses – but we want to see the UK sectors recover with a robust and more considered approach to tax planning and cashflow, to get businesses in the best possible position for recovery and growth,” he added.
“Tax incentives and reliefs are there to help ensure UK companies are as competitive as possible. From reinvesting cash into innovation, to enabling companies to pay off debts or hire and develop their team, the money saved can be transformative to any business.
“It’s not just tax reliefs and incentives, too – our advice to companies that need to free up cash is to make sure they leave nothing off the table. Make sure every part of a business is up for discussion and you could be surprised at what can be achieved.”