Paying corporation tax (CT) and value added tax (VAT) is an unavoidable element of running a successful business. As an accountant there’s plenty your firm can do after tax submission to help time-poor and cash-strapped clients manage these regular quarterly tax payments – and, by doing so, maintain a positive cashflow position and a healthy balance sheet.
In fact, by looking for the right contextual triggers, it’s possible to use tax advice as a conversation starter for a multitude of added-value projects around cashflow forecasting, funding advice and longer-term strategic financial planning.
Spotting the challenging tax periods
As we outlined in Part 1 of this series, the Christmas slowdown in December can result in a tricky period for many business-to-business (B2B) companies.
For a B2B client with an April year-end, poor revenue in December is then immediately followed by a quarterly CT bill in January and a VAT bill in March – creating a triple-whammy of events that serve to create cashflow issues and a lack of funds to cover those tax payments.
The irony here is that none of these tax events are unexpected or sudden. CT and VAT payments are wholly predictable, with the tax cycle dictated by the client’s choice of year-end. So, if these payment dates are entirely predictable, there’s an opportunity for your firm to look for these tax triggers and instigate preventative measures to lighten the impact.
Tax as a contextual trigger for cashflow and funding conversations.
As we know, business tax payments follow a cycle – with the company’s year-end date defining the months in which their CT and VAT payments will be due, as you can see in the chart below.
