Keeping the taxman happy: £140,000 Tax Finance & £375,000 working capital

As a business advisor, you may need to give clients support with a wide range of challenges. A problem with the taxman may well be one of them. 

Tax bills should be predictable and your clients should be able to prepare for them - but things do not always go to plan.  VAT is a regular drain on cashflow - but the real problems can come at year end, when a big corporation tax bill can mean a major cost.

This can become a real problem at a time when many businesses are at their slowest.

You may be able to give your clients the help they need if you call on us at Rangewell.

We know the lending solutions that may be available when a business faces problems with tax - and we can work with you to deliver the answers your clients need.  

We recently helped secure £140,000 funding for a Solicitor whose practice had run into major funding problems because a problem with HM Revenue and Customs had caused a crisis with other funding needs.

The challenge

We were approached by a business advisor who worked closely with his solicitor client - who had been running a practice for the past ten years, and made the decision to convert to a limited company rather than continue to operate as a partnership.

They believed that the change is status would be problem-free, and expected to continue to receive support and funding from their bank.

However, they ran into a problem. As a limited company, they were liable for corporation tax and found that they owed £140,000 to HMRC at the end of their first year.

“We should have seen this coming - but our speciality is divorce and family law, not tax.”

They were initially confident that their bank would continue to support them, and approached them to provide funds to cover the tax bill. But there was a problem. They also needed to raise cash to support their business plans. 

“We wanted to update our premises to attract clients - and we needed to invest in marketing and publicity, a website and more. It was all adding up to a major cost - but as a profitable business we did not believe that we would have any difficulty raising the money.”

The problem came when they approached their bank - who ran a credit check as part of their approval process. When they saw that the practice owed money to HMRC, the banks systems immediately vetoed any possibility of a loan.

The client sat down with his advisor and explained the problem. The advisor believed that his client's bank might be able to offer him a lifeline - but they saw the downturn in his business and took it as a red flag against further borrowing. He heard a similar story from various other lenders that he approached directly - while brokers were also unable to help arrange the funding he needed.

“We were caught. We could not raise the cash we needed to make the most of the business, and because we had applied for working finance funding, the bank saw it as evidence the practice was in trouble, and  would no longer consider us for funding for the tax bill.”

Time was running out - HMRC will charge substantially for late payments, and the advisor approached us at Rangewell to provide help.

Are you looking to help your clients with business finance? Or do you want to introduce a valuable new service along with an additional income stream for you? Find out how here

How we helped

We saw that a Business Tax Loan would ease the impact that a big tax bill would have on a struggling practice. It can help deal with an annual tax bill when it is an emergency and spread the cost of your tax bill into more manageable monthly payments.

Tax Finance allows you to ensure that HMRC can be paid on time and spread the cost of business tax obligations over a 12 month period.

We can find you lenders who specialise in Tax Funding who can provide funds in under 24 hours, and can pay funds directly to HMRC if required.

We found a lender ready to advance £140,000 as a Tax Loan at 10.45%.

But we didn’t stop there. We saw that, with the tax bill paid off, there was nothing to stop our client securing the working capital he needed to support his practice - and arranged an additional £375,000 Tax Funding to provide it.

At Rangewell, we can work with you to provide the full range of commercial finance for your clients. Loans, Asset Funding, Commercial Mortgages, or any other kind of finance - our expert teams find the most appropriate funding solutions and the most competitive rates.

Find out more about partnering with Rangewell today to help your clients and your accountancy practice too.