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Small businesses are reeling from lockdowns, but a tax burden looms

Months of lockdown, limited trade and money spent on anti-Covid-19 measures mean thousands of small business owners are at the breaking point. But for many, next Sunday’s payment deadline could be the last straw.

Although revenues collapsed with little or no cash coming in for ten months, costs such as rent, mortgages, utility bills, and leases all had yet to be paid. This has resulted in the money normally set aside to meet the tax bills to be exhausted in many cases, as well as any cash buffers and even personal savings.

Just trying to survive has cost many entrepreneurs a lot. Yet they are now faced with income tax bills from the previous fiscal year (until April 5, 2020), when the coronavirus was only starting to impact the economy.

Fight for Survival: Dennie Smith's Hair Salon Is Closed For Lockdown, But She Still Has To Pay Rent And Tax Bills

Fight for Survival: Dennie Smith’s Hair Salon Is Closed For Lockdown, But She Still Has To Pay Rent And Tax Bills

Leading business groups are urgently calling for an extension of the self-assessment deadline to give struggling companies much-needed financial breathing space.

Like many others, Dennie Smith is not having a great month. Not only is her hair salon in South Croydon, Vintage 62, closed due to the latest lockdown, but after a year in which revenues have fallen by half, she is facing a tax bill of nearly £ 14,000.

“It’s just awful,” she says. ‘We usually generate a turnover of around £ 165,000 a year, but because of all the lockdowns, tier restrictions and not being able to run at full capacity when we could open, we’re 50 percent down.

‘We lost £ 4,000 in bookings the week before Christmas when we had to close almost without notice and I just sat down and cried.’

After selling her house six years ago to start her business, Dennie has to pay two lots in rent – the salon costs £ 1,250 a month, even when closed, and there are extra bills on top. She had access to a few company grants, but that didn’t even cover her expenses. There are also two large VAT invoices from the time that she could open shortly.

She can only pay for her upcoming tax bill thanks to an inheritance from her recently deceased parents-in-law. “Without it we would have gone bankrupt,” she says.

“Many companies are in a terrible situation, while employees are paid for sitting at home. If you haven’t been able to make money for months, where should you find the money to pay your tax bill? ‘

Penny Callaghan opened her fashion boutique and online store, Colmers Hill, near Bridport in West Dorset five years ago, having previously run a store in Lyme Regis. She has lost business for five months.

“It’s been a nightmare,” she says. Because supplies ordered before the lockdown had to be paid for and operating expenses incurred during the lockdown, Penny had to use every cent of her cash reserve to keep Colmers Hill afloat.

She says, “I don’t know how much longer I can go on. If we are closed for another two months, that will be a huge problem. ‘

Like other retailers, Penny was able to claim a number of business grants and is grateful for the support. Still, she adds, ‘It’s only going so far and we’ve lost £ 100,000 in income from the pandemic.

‘I had to get a Bounce Back loan or we would have gone under. Now I just hope that the last scholarship is paid so that I can pay my tax bill. Of course I prefer to use that to support my company. ‘

Several organizations are calling on the government to extend the month end date to give small businesses a vital breather.

The Association of Chartered Certified Accountants has lobbied HM Revenue & Customs for an extension, but has so far been turned down.

Glenn Collins, head of technical advice and policy, wrote to the IRS: “We urge the IRS to reconsider and extend the deadline until the end of the tax year. [April 5, 2021] to provide assistance to struggling businesses. ‘

So far, Revenue & Customs stands firm, but says the automatic late filing fines won’t be due – though they will likely be issued and then canceled on appeal. Penny says extending the month end date would be “ great. ” “It would really help,” she adds.

“It would mean we could withhold some money and keep the business going until we can open again.”

Mike Cherry, president of the Federation of Small Businesses, says, “This has been a tough year for the self-employed. Even for those who have had some help, bills have soared, debts have skyrocketed, and revenues have plunged.

“The government must responsibly manage the threat of impending tax bills and make it clear that it will help those who struggle to pay.”

WHAT TO DO IF YOU CANNOT PAY YOUR BILL

Even if you can’t pay what you owe, you – or your accountant – still need to submit your self-assessment form before the month-end deadline.

Income & Customs will automatically issue a fine of £ 100 if you do not file a return by January 31. But it has indicated that there will be no fines to pay if the delay is a result of the pandemic.

If you can’t afford your self-assessment tax bill, you may be able to pay it in monthly installments if you owe less than £ 30,000 and you have no other debts with the tax and customs authorities. However, interest is due on the outstanding balance from the beginning of next month.

If you are unable to pay other tax bills due to the coronavirus, please contact the Revenue & Customs Covid-19 helpline on 0800 024 1222 or chat room at gov.uk.

Small Business Essentials

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