Rethinking Tax in Response to COVID 19

The COVID 19 pandemic has severely affected businesses across the country and around the globe. From disruptions to supply chains, furloughed staff and a shift to working from home and changes in operations, the impact on revenues and cash flow has been drastic. Although the government has been providing incentives to help ease the way through this challenging time, when they come to an end the financial impact may be even more severe. Here we discuss how businesses should be rethinking tax in response to COVID 19.

We have no prior warning as to what exact measures the Chancellor will introduce when the Spring budget is announced. However, due to the substantial amount of borrowings the government have had to make during the pandemic and a huge increase in demand for public services, it is realistic to think that taxes will rise.

Companies have no idea what these taxes will be so they need to focus on the current tax rules in place and what they can do to help keep their business running.

Extract cash and key assets from the business 

Businesses should be considering whether they have any valuable assets that they can extract in order to safeguard them from the trading environment of an uncertain economy like the one we currently have. These key assets could include cash or property. At the moment, as tax-efficient extraction is possible under the current legislation, some companies should consider this before any legislation is altered.

Early retirement  

Although it may be sooner than hoped, business owners may want to consider an earlier retirement. Now may be a good opportunity to pass the business on to a younger generation who potentially will be more agile. Alternatively, companies should at least be considering their succession plans. The pandemic has shown us all how unpredictable life can be and businesses need to have a future plan in place even if it is not actioned soon.

Incentive staff with shares 

Share values have been suppressed globally and although this isn’t great news, it can be an opportunity for companies to offer a share-based incentive scheme. This can be an extremely effective method of ensuring you keep the key members of staff that you know you need to have with you to get through the pandemic and grow the business in the future. Providing staff shares means that they will have a vested interest in the success of the company and will help the company to grow post-COVID 19.

Adapting quickly  

Businesses are all different and have responded to the current situation in completely different ways. The key is to adapt quickly. No one has a crystal ball, however those businesses that are quick to adapt their business model in light of the pandemic will be in a better position to get through the crisis. For example, with the shift in people working from home, it has been the businesses who have already invested in cloud computing and digitisation that have found this transition slightly smoother.

The COVID 19 pandemic has escalated the introduction of many tax reforms which has been difficult for businesses of all sizes to keep track of, but especially small to medium companies that do not have a tax team in house. Although we cannot predict the future, we know that tax is changing so fast, and it will play a vital role in the recovery of the economy so companies need to plan for the future now. The Wright Vigar team are here to not only help you digest the current changes but also to help determine the best course of action for your business and plan for the future.  For more information email website@wrightvigar.co.uk