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How to stay on top of your business tax

Published on 12th July 2018 - Last update on 8th January 2019

Although it’s something none of us enjoys, keeping up with your business’ tax obligations is a vital responsibility if you’re to operate in the UK. However, coupled with your other monthly expenses, making sure that you have the necessary capital at hand isn’t easy. But if you were to experience a slowdown in sales or be confronted with an unexpected payment expense, dealing with a business tax demand on top could cause you many sleepless nights. Fortunately, there is a group of products collectively known as Tax Finance to help SME owners cope with business tax demands. All you need to do is choose a solution which most closely answers your business’ needs.

Overdraft Replacement

One of the most popular ways of raising capital for an upcoming tax demand is by applying for an Overdraft Replacement, which can be either a Secured or Unsecured agreement. Because this form of funding is subject to little or no usage restrictions it can be used for a variety of purposes, including tax or any other operating expense. It works by the lender setting up a line of credit, which provides you with an allowance based upon your business’ past income, similar to the way you would use a business credit card. Plus, you aren’t obliged to draw down any of the funds that are made available, but anything that you do use is subject to an interest charge and will need to be fully repaid within 30-90 days (depending on the agreement). Once this has been fully repaid, you’ll instantly gain access to the allowance again, drawing and repaying funds on a revolving cycle, making it a flexible option for many SMEs.

Got an upcoming tax demand that needs paying? Don’t have access to the necessary capital? Apply for Tax Finance or learn more about how your business could benefit.

Merchant Cash Advance

Merchant Cash Advance is a form of Unsecured short-term lending that provides you with an advance based upon your predicted future card sales. As such, your business must be able to accept credit and debit card transactions in order to qualify. In order to provide you with an advance, you’ll need to present lenders with at least 3 months of your business’ latest consecutive sales reports. Using these, they’ll work out an average. So if your business generates £35,000 in card sales each month, you could receive an advance for the same amount. Plus, the advance isn’t subject to any usage restrictions, allowing it to resolve tax demands or any other operating expenses you may need to cover. In addition, Merchant Cash Advance is gradually repaid using a Flexible Monthly Repayment scheme. This allows the lender to set up an intercept with your card processing provider and automatically deduct an agreed percentage from each of your card-based sales until the debt has been fully resolved, without affecting your cash-based sales.

Invoice Finance

Finally, if you’re worried about your business’ tax arrangements, Invoice Finance offers you yet another Secured way of resolving tax demands using the money that’s owed to you by your clients. Whether it a late payment or you just need money sooner than expected, Invoice Finance allows you to release up to 90% of the funds tied up in any business-to-business (B2B) invoice worth more than £5,000. Plus, anything thing that you do release isn’t subject to any usage restrictions, allowing it to support tax demands and any other operating expenses. However, you need to be aware that Invoice Finance is available in two different forms:

  • Discounting: If your business is able to generate and maintain an annual turnover of at least £100,000, you could be eligible for Invoice Discounting, providing you can keep your ledgers up-to-date and you have an effective credit control system in place. Rather than having your customer (the debtor) pay your business, they’ll make payment directly to the lender. As soon as they’ve fully paid off the money that they owe, the lender will release a balance (e.g. 10% of the invoice) minus costs and fees.
  • Factoring: Meanwhile, if your business has an annual turnover of at least £25,000, you may want to consider applying for Invoice Factoring instead. You’re still required to maintain up-to-date business ledgers, but this option allows the lender to pursue the customer responsible on your behalf, saving you valuable time. Plus, you can also choose to be discrete about the fact that you’re using the services of an Invoice Finance lender. In addition, some lenders may even offer you Bad Debt Protection, safeguarding your business in the event that your customer goes bankrupt or doesn’t settle what they owe.

Business Tax giving you sleepless nights?

As a business owner, you’d much rather see to maintaining your goods and services. However, like it or not, you still need to pay your business tax when the time comes. The problem is that you may not always have access to the amount of capital that’s required. But rather than forcing your business into financial difficulty and having issues with HMRC, you could apply for Tax Finance instead. All you need to do is source an agreement that’s suitable for your business.

At Rangewell, we’re an Access to Finance specialist who has mapped over 400 lenders to offer you an overview of more than 23,000 business finance products. Our services are free to use and we’ll also guide you through the application process. We’re with you every step of the way. So if you need help keeping a lid on your tax affairs, apply for Tax Finance today or find out more with Rangewell.

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David Harrison

David Harrison

Content writer
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