Now more than ever ‘CASH’ is king

Daily monitoring of the bank account online is now necessary.

The focus of the farmer should move to cash flow instead of profit and loss account. Given the current cash flow challenges facing farm business many farmers could be or become, cash flow insolvent.

Government has introduced a number of financial supports available to farm businesses with specified criteria attaching to each support. In all cases the farm must demonstrate that it has been adversely affected by coronavirus. Some of the support are grants which are taxable and not repayable, others are loans which are repayable and then there is an enhanced Time to Pay Arrangement for self-employed to pay their tax.

There are three main grants. Firstly, a self-employment grant for three months with strict criteria in relation to eligibility. Secondly, there is a grant in relation to employees and directors in a company for four months. Thirdly, for those farm businesses who have diversified into retail, hospitality, tourism and leisure there is a grant of £25,000 subject to taxable valuation. Registration for this latter grant closes on 20 May 2020. All of these grants are taxable. For individuals in receipt of Tax Credits or Universal Credit, the grant constitutes income.

There are two loan schemes with specific criteria applying to each. The main criteria is that the business must demonstrate that it was adversely affected by the virus, and that the business wasn’t classed as a business in difficulty at 31 December 2019. Details of all schemes are available on HMRC, NI Business info and British Business Bank websites.

Self-employed farmers trading as sole traders or partners in a partnership may defer the payment of tax due on 31 July 2020 until 31 January 2021. If a farm business has a tax debt which it is unable to pay, the farmer should very thoroughly investigate with his accountant that the liability is definitely due and that there are no repayments possible, profit averaging, loss relief available. If, after that examination, the tax is correctly payable, it is possible to agree a Time to Pay arrangement with HMRC.

Now is the time for farm businesses to retain cash in the business by maximizing government support, communicating with lenders, negotiating payment deferrals and maximizing tax relief or refunds available.

For further information, telephone (028) 82241515.