Almost half of UK small businesses say they struggle with paying their tax bills, according to a survey by UK insurer RSA, so is it time to re-assess how they tackle this?
Running a small business is a challenge; in fact, more than half of British small businesses (55%) go under within their first five years. Of all the threats to the survival of these firms, the tax system is one of the greatest, with 44% citing it as a barrier to success.
Lack of bank lending was a problem for 38% of small businesses, while the cost of running a business was too high for 36%. These three factors are not unrelated; staying on top of your tax liabilities and cash flow underpins business success – no matter how good your product or service, if these requirements aren’t met then a company is unlikely to go the distance.
Cash is key for small businesses; having ready access to funds is essential for the day-to-day running of a company. Whether it’s to meet increased demand from clients or to invest in infrastructure to expand for the future, few small businesses can survive without it.
A loan to cover a tax demand can
be a stepping stone to success
Most businesses handle their tax liabilities using cash flow, but there are other approaches which can be more efficient. For example, a quarterly or annual small business loan to cover your VAT bill offers a short-term payment solution that ensures your tax liability is covered, yet leaves cash in the business. Covering Corporation Tax bills with a loan that can be paid back over a 12-month period is another way to spread the cost of the tax owed, leaving funds free to be funnelled back into the most profitable areas of the business and ultimately increasing your bottom line over the year.
Far from being a facility to be used only in times of financial distress, a small business loan accessed at the right time to cover a tax demand can be a stepping stone to success.
Merseyside-based company Graham’s Cartons has been manufacturing quality packaging supplies for over 52 years, with clients all over the UK. As an ever-expanding enterprise, cash flow is the key issue for the business, affecting its ability to meet demand whist investing in infrastructure to allow it to develop and grow for the future.
To help alleviate the strain, the company took a small business loan with White Oak UK to allow it to spread the cost of paying its tax bills over a 12-month term, freeing up cash for the business to invest for the future.
“As a result of improving our cash flow, we have been able to invest in better machinery and new vehicles, which has increased our output,” said Colin Graham, managing director of Graham’s Cartons. “We’ve also been able to invest in increasing our workforce, which has enabled us to meet the heavy demand of our industry, turning around orders in a matter of days”
Andy Davies, Group Sales Director at White Oak UK explained, "Covering the cost of Corporation Tax is one way for businesses to unlock their money to develop other areas of their business. To see that Graham's Cartons have been able to expand off the back of this short-term investment is a testament to this."
The extra capacity afforded to the business by addressing their cash flow issues has also enabled them to take on a higher calibre of client. Most notably, they’ve added a large North-West football club to their client list – a fantastic score for a company striving to stay at the top of its league.