Fluctuating income makes tax deadlines challenging for seasonal businesses. Discover how finance can help you to manage VAT, PAYE, and corporation tax while keeping cash flow stable.
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Running a seasonal business means getting used to seeing your revenue ebb and flow throughout the year. However the deadlines for VAT, PAYE and corporation tax (CT) are fixed – they don’t take fluctuating revenue into account. This means that tax payments for seasonal businesses can be tricky to navigate.
In this article, we’ll explore the common tax challenges for seasonal businesses, highlight the benefits of tax loans, and offer practical tips for spreading the burden of tax payments more evenly for seasonal businesses.
Periods of booming revenue followed by quiet patches are par for the course for seasonal businesses. While this variability is expected, it can create significant stress when fixed costs and tax obligations remain constant throughout the year. No matter how much you try to plan for them.
For many seasonal business owners, the only option is to draw on cash reserves or rely on external seasonal business finance to manage these demands.
This underscores the need for financial strategies tailored to the cyclical nature of seasonal businesses. Without careful planning, the weight of these obligations can cut into growth, drain resources, and even risk your company’s future.
While every business is unique, there tend to be three specific tax challenges that seasonal businesses face. Understanding these challenges will go a long way towards mitigating their impact. Let’s take a look at all three in greater detail.
Seasonal businesses often face tax deadlines during off-peak periods, creating a cash flow crunch.
VAT, PAYE, and corporation tax payments often fall during periods when revenue is lean, making it a struggle to cover essential costs such as payroll, utilities, and day-to-day operations. This mismatch can force you to make some tough choices, like delaying investment or seeking costly short-term financing.
Aside from planning and building a reserve during peak periods, a practical solution to this challenge is to take out a tax loan. Tax loans are designed specifically to bridge the gap during lean periods by providing the funds needed to meet VAT, corporation tax, or PAYE deadlines – without depleting your working capital.
For instance, you can use a tax loan to spread your tax payments over manageable instalments that align with peak revenue periods. This reduces the strain on cash flow and eliminates the need for costly short-term borrowing or delaying essential investments.
Additionally, consider adopting HMRC’s cash accounting scheme. This scheme lets you pay VAT only on income received rather than invoiced. This ensures that tax payments reflect actual cash inflows, making it easier to meet obligations during quieter months.
Note, however, that to join the scheme your VAT taxable turnover must be £1.35 million or less.
Seasonal businesses often face the challenge of managing expenses across fluctuating revenue cycles, which can lead to missed opportunities for tax savings.
One common oversight is failing to account for deductible expenses incurred during the off-season. These eligible costs may include things like marketing campaigns designed to drive future demand, maintenance of equipment or facilities to ensure readiness for peak periods, or employee training to upskill staff in preparation for the busy season.
These expenses are easily overlooked since they happen during quieter months, when the focus may shift away from detailed financial management. These missed opportunities result in higher-than-necessary tax payments and limit the financial flexibility that could be used for reinvestment or operational improvements.
By seeking professional tax advice, you’ll be able to better track and claim these expenses, maximise your eligibility for tax relief and improve your overall financial health.
Forecasting errors or inaccuracies in accounting can result in paying more tax than you owe. This is a costly mistake that ties up valuable working capital. If you’re a seasonal business, this is particularly damaging since cash reserves are often needed to weather off-peak periods or prepare for the next busy season.
Overpayments not only reduce the funds available for immediate priorities, such as replenishing stock or covering operational costs but also limit your opportunities for long-term investments.
Professional advice from an accountant or tax specialist can help you avoid this situation. These experts can identify potential deductions, ensure compliance with HMRC regulations, and help you optimise your tax strategy.
It’s also worth establishing a flexible financing buffer, such as a tax loan, which can be used to address unexpected tax liabilities without depleting working capital.
A tax loan is a type of finance designed specifically to help businesses cover their tax obligations. It doesn’t matter what kind of tax: It can be used to pay VAT, PAYE, and corporation tax.
These loans provide a bridge during lean months, enabling businesses to meet deadlines without depleting cash reserves.
Tax loans are a practical and flexible solution, especially for seasonal businesses with fluctuating income cycles.
When it comes to tax loans, iwoca offers a solution specifically designed with seasonal business needs in mind.
With an iwoca Flexi-Loan, you’ll get approved for a credit limit (much like a credit card). You can then draw down exactly what you need when you need it. Our flexible repayment terms mean you can repay early without incurring fees, saving you money in the long run.
If you’re in a pinch, an iwoca loan is perfect. Applying for an iwoca loan takes minutes, and approvals are usually within 24 hours. The straightforward process means you get the funds you need quickly, without unnecessary red tape.
Our Flexi-Loan is perfectly suited to the ebb and flow of seasonal cash flow. Since you’re in control of how much you borrow, you can tailor your Flexi-Loan to your revenue patterns, getting support when you need it most.
Handling taxes as a seasonal business doesn’t have to be stressful. With a bit of planning and the right approach, you can ease the financial pressure. Here are some simple tips to help:
Align your financial year-end with cash-rich months. For example, if your peak season is summer, consider setting a June or July year-end to ease the burden of Corporation Tax payments.
HMRC offers VAT schemes designed to support businesses with fluctuating cash flow:
Implement robust systems to track deductible expenses throughout the year, even during the off-season. Tools like accounting software can help capture costs such as marketing, training, or equipment maintenance.
A qualified accountant will ensure compliance with tax regulations, optimise your tax strategy, and identify potential savings. Their expertise can be invaluable in navigating complex tax challenges.
As the saying goes, the only certainties in life are death and taxes. And while we can’t help with the first part, we can certainly help you manage your tax payments as a seasonal business.
An iwoca Flexi-Loan features customised credit limits and transparent terms. Once approved, the funds can be transferred directly to your bank account, often becoming available within hours.
Use it as you see fit: For covering PAYE, VAT or Corporation Tax. Or indeed anything else that keeps your business ticking like marketing, hiring or purchasing equipment.
Find out how iwoca can help you cover your tax liabilities by visiting our website.
Tax deadlines for VAT, PAYE, and corporation tax are fixed, regardless of when your business earns its revenue. Seasonal businesses often face these deadlines during off-peak months, when cash flow is at its lowest. This mismatch can create financial strain, forcing owners to draw on reserves, delay investments, or turn to expensive short-term financing.
Tax loans are designed to help you meet their tax obligations without depleting working capital. They let you spread tax payments over manageable instalments that align with your revenue peaks, reducing cash flow stress during lean periods. With a tax loan, you can preserve funds for essential expenses and avoid penalties for late payments.
