Cornwall businesses warned to brace for October cash crunch

If your business has spent the summer papering over rising bills with whatever is left in the account by month end, October is worth clearing space for. Three separate tax deadlines land inside three weeks, and accountancy firm Azets is warning that businesses across Cornwall who have not put money aside could find themselves short, and facing HMRC, at the same time.

Three dates worth putting in the diary

The squeeze comes from timing as much as cost. Businesses that pay Corporation Tax, VAT and PAYE can find all three falling due within the same few weeks every October.

Corporation Tax payments are due on 1 October. VAT returns follow on 7 October. Then comes the PAYE Settlement Agreement deadline, with postal payments due by 19 October and electronic or online payments by 22 October. For a business already stretched, that is three bills to find in three separate weeks.

Why the pressure is building

Azets is a top 10 UK accountancy and business advisory firm with offices across the South West, including Truro. Praveen Gupta, the firm’s UK head of tax, said many local businesses are struggling with the rising cost of wages, supplies and energy, and that this is hitting cashflow levels hard.

“There’s a real risk they could face an Autumn cashflow crisis when these tax bills are due if they haven’t put aside the money to pay them or thought about what they might do if they don’t have the funds to pay these bills,” Praveen said.

What to do if the money isn’t there

For businesses worried about meeting their payment deadlines, Praveen said there are options short of simply missing them. Borrowing from a bank or commercial lender is one route. The other is a Time to Pay arrangement with HMRC, a formal repayment plan for businesses that cannot cover their full Corporation Tax, VAT or PAYE bill in one go.

“HMRC will consider repayment plans under a TTP for businesses that can’t meet their full Corporation Tax, VAT or PAYE payments, especially if you have the capacity to make a part-payment upfront,” Praveen said. “These arrangements usually give you between six and 12 months to pay your outstanding debts, although that does depend on your circumstances and they will need to be satisfied that you’ll honour the arrangement.”

The cost of ignoring it

Praveen was clear that avoiding the issue is not really an option. HMRC has pursued legal action over unpaid debts in recent years, and he said the approach shows no sign of softening.

“Since the end of the pandemic, HMRC has been proactive in going to court to get companies wound up if taxes aren’t paid on time, and they don’t seem to be softening their approach, so firms who don’t pay their tax bills could face a court hearing and a winding up order,” he said.

His advice to directors worried about upcoming deadlines is to keep a close eye on cashflow and get advice early, rather than waiting until a bill is already overdue.

“You wouldn’t drive a car without a dashboard, and you can’t run a business without knowing what your key tax and payment deadlines are and how much cash you have available to pay them,” Praveen said. “Knowledge really is power, in this case the ability to pay all your bills on time without running into problems. If you’re worried about your tax position or your finances, the best thing you can do is speak to an accountant. They’ll be able to help you understand what you need to do, when you need to do it by and how much cash you need to hold back for key moments in the financial calendar.”

Based on the latest official figures, there are 235,000 VAT and/or PAYE registered businesses across the South West, all facing some version of the same October squeeze.