Watching the Tax flow helps the cashflow
Wednesday 27th July 2011
Those who believe cashflow is a corporate concern may be surprised to hear that it provides a focus for the Private Client Team.
After all, most of our clients pay tax out of income and through self-assessment – which means we need to advise them in good time of the money they must find by the deadlines of January and July 31 each year. If they do not, they become liable for a range of interest and late payment penalties.
With the second payment on account falling after the tax year has ended, we find ourselves working with a varying number of clients to review their liability and gauge if there is any merit in making a claim to reduce. The standard rule is that each payment on account is equal to 50% of the previous year’s liability, but if we know the client will have less income the following year or will benefit from tax planning or breaks - Enterprise Investment Scheme, Venture Capital Trusts or pension, for example – we can make a pre-emptive claim to reduce on account payments.
This means the client does not have to wait months for a tax refund, and in many cases we can complete the cycle by filing the return before the end of July.
The lesson is that the sooner the return is filed, the sooner an overpaying client gets their refund. Or, put another way, getting a tax return in early can improve our clients’ cashflow.
John Karolczuk Bowman