Product category:
Tax and National Insurance
News Release from: Alliance & Leicester | Subject: Corporation Tax
Edited by the Insidemoneytalk Editorial
Team on 29 November 2007
Corporation bill proves taxing for many
SMEs
For the UK's 3.4 million* small enterprises the corporation tax bill signals money worries and a cash flow crisis, according to new research from Alliance and Leicester Commercial Bank.
With a hike in corporation tax for small businesses in April 2007, and plans for further increases over the next two years, it's increasingly important that small businesses plan in advance to ensure they have enough funds available But a YouGov poll commissioned by Alliance and Leicester Commercial Bank reveals a worrying number of businesses are not geared up to pay their bill
This article was originally published on Insidemoneytalk on 23 Feb 2007 at 8.00am (UK)
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Only 40% of SMEs have set aside sufficient funds to cover their corporation tax payments ahead of the deadline for their business.
Despite saving to pay their bill, more than four in ten of these companies (44%) keep the money in a current account, missing out on millions of pounds in potential interest by not making their money work harder for them.
The results also reveal an alarming trend to leave things until the last moment.
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Just over one third of those questioned (35%) are waiting until closer to their specific deadline before making preparations.
But with penalties and interest charges for companies that miss their payment date, this can be an expensive mistake to make.
However, for some the problem is not a lack of preparation, but the fact that they simply cannot afford the bill.
A worrying 19% of companies that have not set aside extra funds say they can't because of the number of late payments owed to them at any one time.
Those that aren't ready say they are going to have to resort to taking tough measures to meet their corporate tax deadline, potentially risking the future financial health of their business.
A quarter (25%) said they will have to use personal finances and 23% said they would have to delve into company profits, reducing the amount business owners can plough back into their company.
Steve Jennings, Director of Business Banking at Alliance and Leicester Commercial Bank, said: "Although businesses expect a corporation tax bill, it can create sudden cash demands on a company, particularly SMEs who might already struggle with their cash flow.
This research highlights just how ill-prepared some businesses are and it is worrying to think that they are jeopardising their future business prosperity by dipping into company profits or using their own money.
"Good advice to any small business owners is to make their cash work harder for them by putting funds aside throughout the year or deposit year end profits in an account that offers quick access and risk-free high levels of return." Alliance and Leicester Commercial Bank has a market leading instant access deposit account for businesses with rates almost double those offered by the Big Four banks.
The Business Instant Reserve account offers market leading interest rates (5.55% gross on balances from £50,000 to £250,000 / 5.85% gross on balances over £250,000) and tracks the Bank of England base rate.
There is no minimum balance and deposits are free and unlimited.Steve Jennings adds: "Our Instant Reserve account offers market leading value and the assurance of a base rate tracker, ensuring that business customers will receive an excellent return on their surplus funds over the long term.
We have also designed the product to be simple and straightforward, with only one interest rate tier on the account and I believe that it will prove to be very popular with business owners."There are a number of deposit accounts which pay very poor levels of interest and I would urge business owners to shop around and make their surplus funds work as hard as they can.".
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