Paul Dounis

As key government support ends such as VAT deferral, rent moratorium and the furlough scheme, RSM predicts a doubling of corporate insolvency in 2021, or in the 12 months after government support is wound down; and sustained levels of corporate insolvencies 15-20 per cent higher than the previous years (2017-2019) for up to three years.

Paul Dounis, RSM’s head of restructuring in Scotland, said: “The coronavirus pandemic has led to significant uncertainty for Scottish businesses, with management teams facing scenarios outside the perimeters of their experience and contingency planning; and many businesses have had to take on more debt, so unlocking cash and identifying any funding gaps will be crucial to allow a business to trade out of lockdown.”

In the UK Budget, the Chancellor announced an extension to the loss relief provisions for corporation tax so that trading losses made in accounting periods ending between 1 April 2020 and 31 March 2022 can be carried back three years rather than the usual one year.

A similar extension is available to unincorporated businesses for losses made in the 2020/21 and 2021/22 tax years. The amount of loss that can be carried back to the most recent year is unlimited, but there is a cap of £2m on the loss that can be carried back to each of the prior years and there are some additional considerations for groups of companies.

Mr Dounis added: “So, for businesses that have experienced a loss in the last year, getting the accounts and tax returns prepared early and filing these with HMRC could unlock a repayment of tax paid in previous years and bring a much needed cashflow boost.

“In addition, it will be vital for businesses to manage their tax cash flows, by taking advantage of HMRC’s ‘time to pay’ and other arrangements for deferring tax payments, and also by considering existing tax reliefs for innovation, investment or land remediation.”