Survey finds two thirds of SMEs won’t be able to pay their deferred tax liabilities in six months’ time

An expert panel of accountants representing over 16,000 SME clients in the UK have reported that 61% of firms that made enquiries for CBILS are still awaiting a response, with just 4% progressed to full application and 9% accepted.

Findings also reveal that 55% of clients have decided to defer their tax payments. Of these, just 36% say they are likely to be able to meet these tax liabilities in six months’ time, indicating a significant 64% will not be able to do so.

The results are revealed in the latest ACCA UK and The Corporate Finance Network’s (CFN) SME Health Tracker, which also points to signs of surprising recent stability with only 3% of SMEs deciding to close, compared to 5% two weeks ago.

Despite the stalling with CBILs, an improving trend is also appearing when it comes to SMEs’ views about accessing cash during lockdown. The findings show that 12% of SMEs will struggle to access cash to last them two more weeks of lockdown, compared to 30% for the 28 April tracker. Optimism is also evident for the longer term as the UK makes tentative steps to unlock, with 16% saying they would not be able to access cash to last four more weeks of lockdown, compared to 38% on the 28 April.

Claire Bennison, head of ACCA UK comments: ‘With the Coronavirus Job Retention Scheme now extended until October, and the recent rescue packages announced by the government, we’re seeing two sides to this tracker. Some schemes seem to be working well for SMEs and entrepreneurs. But alarm bells ring about the decision to defer taxes – this could be VAT, corporation tax and personal taxes, which all stack up for the future alongside PAYE and National Insurance payments. We’re also hearing about the mental strain SMEs are under – and deferring will only add to this stress and strain in the near future.’

Kirsty McGregor, founder of The CFN, and an accountant, comments: ‘There’s a set of SMEs stuck in the middle – those who have perhaps 20 to 100 staff with a £1 million to £3 million turnover. These are the SMEs caught in a trap where they’re not being approved for CBILs, and the Bounce Back loan is not enough for them. The stark reality is that these are the employers who, once furlough tapers off, will not have enough working capital and cashflow to kickstart their trade. Releasing more funds to these businesses is the critical requirement if we are to ensure the future survival of this key segment of our SME community.’

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Maurice Richmond
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Monique McKenzie
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Twitter: @ACCANews
http://www.uk.accaglobal.com

Notes to Editors
The expert panel of accountants polled represent 16,000 clients across the UK and the poll closed on the afternoon of 12 May 2020.

About SMEs
SMEs, (typically less than 250 employees), account for 99.9% of the private sector employment in the UK and there are 22 million employees working for these private sector businesses.

About ACCA
ACCA (the Association of Chartered Certified Accountants) is the global body for professional accountants, offering business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management.

ACCA UK has 167,000 members and future members. Globally, ACCA supports its 219,000 members and 527,000 students (including affiliates) in 179 countries, helping them to develop successful careers in accounting and business, with the skills required by employers. ACCA works through a network of 110 offices and centres and 7,571 Approved Employers worldwide, and 328 approved learning providers who provide high standards of learning and development.

Through its public interest remit, ACCA promotes appropriate regulation of accounting and conducts relevant research to ensure accountancy continues to grow in reputation and influence.

ACCA has introduced major innovations to its flagship qualification to ensure its members and future members continue to be the most valued, up to date and sought-after accountancy professionals globally.

Founded in 1904, ACCA has consistently held unique core values: opportunity, diversity, innovation, integrity and accountability. More information is here: www.accaglobal.com

About The Corporate Finance Network
The Corporate Finance Network – www.thecfn.org.uk - The Corporate Finance Network consists of some of the most proactive and commercially astute regional, independent accountancy firms in the UK. They specialise in providing corporate finance advice for smaller transactions.  Kirsty McGregor can be contacted at info@TheCFN.org.uk

"Some schemes seem to be working well for SMEs and entrepreneurs. But alarm bells ring about the decision to defer taxes – this could be VAT, corporation tax and personal taxes, which all stack up for the future alongside PAYE and National Insurance payments. We’re also hearing about the mental strain SMEs are under – and deferring will only add to this stress and strain in the near future."

Claire Bennison - Head of ACCA UK

"There’s a set of SMEs stuck in the middle – those who have perhaps 20 to 100 staff with a £1 million to £3 million turnover. These are the SMEs caught in a trap where they’re not being approved for CBILs, and the Bounce Back loan is not enough for them. The stark reality is that these are the employers who, once furlough tapers off, will not have enough working capital and cashflow to kickstart their trade. Releasing more funds to these businesses is the critical requirement if we are to ensure the future survival of this key segment of our SME community."

Kirsty McGregor, Founder - The Corporate Finance Network (The CFN)