How To Finance Your Tax Bill

financing taxHow To Finance Your Tax Bill

Why does the thought of that impending tax bill get me down? I know it’s coming, I have even put funds aside for it, but it still hurts to see it paid out to HMRC when I know I could be reinvesting within the business or using those funds elsewhere. (This video explains it more)

There are options.

Financing your tax isn’t about desperation or a last resort in paying HMRC, it is about making a choice as to where your capital is best used. It can be handy when funds are short, but is doesn’t have to be that way.

As we approach the last quarter of the year we reach that peak time for companies filing their annual accounts, we also start to move into self assessment tax return season, combine that with a typical end of a VAT quarter and we have Corporation Tax, VAT and Self Assessment all falling due without even mentioning Christmas.

In short, give me a break…

So what do you do?

You can finance your tax liability, whether that be VAT, Corporation Tax or Self-Assessment.

It used to be look down upon to borrow for tax, many high street banks would look at financing a tax bill as a failure to plan. The truth is that often capital can be better allocated elsewhere, plus we all know there is a big difference between making a profit on which you are taxed and having the cash in hand.

The broad options for financing tax are:

  • Tax is financed over a period that sees the borrowing repaid before the next bill falls due. This means VAT paid over 3 months and other tax over up to 12 months
  • The lender will want copies of the latest HMRC position, usually a screenshot of the HMRC page along with the tax bill you are financing
  • Latest accounts and bank statements

The positive here is that if tax is being paid then there should be profit which should mean that any lender requirements are able to be met.

Our experience is that these schemes work very well with a lot of customers that use them again and again.

The bottom line, as we reach a time when paying tax falls due, is to:

  • Look at your cashflow
  • Look at where you want to spend or invest
  • At a time of rising costs ensure you keep capital within the business
  • Look at the options and don’t assume that paying tax means having to do so from your own resources

Any questions then give me a bell, there are some nice options available.

By Dave Farmer

The Video – Financing Tax

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