What are the tax implications of restructuring your business debt?
By Mr Bankruptcy
21st February 2023
Tax may not always be the first thing on your mind when you’re trying to manage a business debt. But restructuring business debts does have tax implications that you need to be aware of, in order to ensure that you are making the right choices. Unexpected tax liabilities can add substantial costs, so it is important to get it right.
How does tax apply to debts?
If a business realises a profit as a result of repaying a debt at less than its full value, then this can be taxed at 20%.
HMRC can, however, offer tax relief for businesses in financial difficulty in order to help them pay down their debt without being hit by an unhelpful tax liability. This means that businesses now have more options open to them when cancelling debt during restructuring.
What should I be aware of?
Different ways or dealing with a debt or restructuring debt can lead to different tax implications and liabilities, so managing debt and associated taxes is a complex operation. This means that tax risks must be considered early on in the restructuring or insolvency processes so that they can be mitigated as much as possible.
Without proper planning and awareness you may incur significant yet unexpected tax liabilities and you may also run into the conflicting interests of stakeholders that need to be managed correctly if you are to move forward with your debt management plan.
When considering your debts, any tax owed is usually considered a priority debt so this is another reason why tax liabilities need to be identified early so you know what tax will have to be paid and how this impacts on your ability to repay other creditors.
Take time to seek professional debt advice
After the impact of Covid-19, many businesses are having to look at their debts and consider ways to manage them effectively and efficiently. To do this, it’s important to know all your options and the implications of each one before you can choose the right path for your circumstances.
Understanding the tax implications of all of this ensures you won’t be caught out by a tax bill that could stall your recovery.
Ensure that you seek specialist advice to find practical solutions that can be delivered in a timely way, so that you can be confident that any debt restructuring you do will take you and your business to the desired destination.
James Rosa Associates
James Rosa Associates is a firm of professional debt advisors and debt adjustors with a track record in helping businesses and individuals deal with debt.
With a supportive and friendly approach, we offer a full range of advice and professional services to individuals and business owners/directors who face unmanageable debt or who are involved in civil or commercial disputes.
Our services include:
We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients to produce bespoke solutions to fit their specific circumstances.
Find out if you qualify for a free consultation
If you want to deal with an unmanageable debt or bring a dispute to a swift and cost-effective resolution, contact James Rosa Associates, ring 0845 6807217 or email enquiries@jamesrosa.co.uk to find out whether you qualify for a free consultation.
Create A Budget That Works for You
By Mr Bankruptcy
1st February 2023
Having a budget always makes good financial sense, but when times are financially challenging a budget can have an added impact in helping you to identify, acknowledge and start tackling your financial problems.
Now, more than ever, people are looking for ways to make the money they have go further, so here is my way to creating a budget that can work for you and your needs.
What do you need to know?
Creating a budget for yourself is about knowing what you can realistically afford to spend, putting you in a better position to handle financial surprises. To create a budget that’s going to work for you, there is some information you need to get you started:
- Your net income so that you know how much money is coming in each month.
- How much you are spending every month. This can be broken down into fixed expenses (such as mortgages and rent, utility bills, subscriptions, phone costs, etc) and more variable expenses (e.g. fuel, entertainment, food shopping), which are necessary, but you have more control over them. You can find all this on bank and credit card statements and receipts to make sure you aren’t missing or underestimating any outgoings.
Using your financial information to plan your future
A budget is a financial plan, which needs an ultimate goal, intermediate steps to get there, and an accurate analysis of your start point. Once you have a clear picture of income and outgoings, you can use this data to take control of your own finances:
- Break down expenses. Split costs into fixed and variable helps you to understand exactly where your money is going, what your bottom-line cost of living is and where there might be opportunities for savings.
- Set realistic goals. Do you want to clear debt, save for a holiday, create an emergency fund? Defining short and long term goals gives you something to aim for and helps you understand what you want to achieve with your finances, making it easier to stay focused on your financial targets.
- Create a plan. Writing down a budget turns good intentions into solid action. Define how you’re going to achieve your goals, weekly or monthly spending limits, allocate income for the basics, the good things, paying down debts and to build an emergency fund if possible. A budget also gives you a yardstick against which to measure progress and adjust your plan to stay on target.
- Review. A budget must be a living document to be effective. Revisit and amend you plan on a regular basis to reflect changes in your circumstances or the financial climate, such as an increase in salary or a hike in mortgage repayments.
Creating a budget that works for you is based on having an honest, realistic understanding of your current financial situation and where you want to go. It can then provide you with the route to developing good financial habits, whether you want to avoid debt or to deal with an existing debt problem.
James Rosa Associates
James Rosa associates is a firm of debt advisors and debt adjustors. With a supportive, friendly and non-judgemental approach, we offer a wide range of advice and professional services to individuals and business owners/directors who face unmanageable debt or are immersed in a civil or commercial dispute. Our service includes:
We are authorised and regulated by the Financial Conduct Authority (FRN665061) to work with clients in order to produce bespoke solutions for their specific financial circumstances.
Find out if you qualify for our free consultation
If you need to tackle an unmanageable debt, or want to bring a dispute to a quick and fair resolution, then contact James Rosa Associates today, ring 0845 6807217 or email enquiries@jamesrosa.co.uk. You may qualify for a free consultation.