Helping clients understand implications of govt's Covid-19 schemes

The Job Retention Scheme payments went directly to employees, which while reducing the costs of continued employment, did not necessarily help support other business activities at a time when income has been significantly reduced.

Getting a clean audit is very important for relationships with lenders and other stakeholders.

Doubts over the ability to continue trading, can result in loan facilities being pulled and higher interest rates if borrowing remains. Moving the goalposts shortly before the payments are due is troubling.

Many companies have already had to ask for an extension to the filing deadline at Companies House for their accounts, because of the difficulties of accessing records and satisfying their auditors that they are viable businesses in the future.

For many companies this extension will take them up to 12 months from their previous year end, which in turn is the filing deadline for corporate tax filings. Companies with a 31 December year end needed to file their accounts before the end of the year.

Company filing troubles

This process of meeting the deadline was challenging, in part because they needed to reconsider their cashflows.

Filing a tax return for most companies requires the accounts to be filed alongside the tax return in an electronically tagged format.

Getting a clean audit is very important for relationships with lenders and other stakeholders.

With accounts completion running up to the deadline, filing the tax return on time became more problematic as returns couldn’t be completed until accounts are signed.

HMRC were generally helpful in agreeing to extensions for Covid-19 related problems, but were initially reluctant to grant an extension until two weeks before the deadline.

Many companies needed to contact overstretched HMRC helplines in the week before Christmas in an attempt to gain an extension and avoid late filing penalties.

The process eventually became clearer, although there was a lottery element to getting agreements as HMRC advisers were sometimes not consistent in their approach.

It would have been  extremely helpful given all the other challenges, if some joined up thinking had enabled HMRC to grant a blanket extension of three months for all companies to mirror the extension granted by Companies House.

In a month where 10 days were lost to extended holidays, there is an ongoing a pandemic and the last touches are being put to Brexit planning, this would be have been a sensible gesture from HMRC.

Creditors

At the same time, the Crown Preference was reintroduced from 1 December.

This defines the order in which creditors can claim money from an insolvent company. In any insolvency that formally commences after 1 December 2020 HMRC has ‘secondary’ preferential status.