With doors opening on 4 July and the two-metre rule now relaxed, it will be back to business for the leisure and hospitality industry. However, this crisis doesn’t end with the dialling down of lockdown and the easing of distancing measures. A further cash boost is urgently needed to ensure all businesses survive long enough to welcome back paying customers. Without government intervention more businesses will fail in the coming months. Immediate cash tax credits could offer a working capital lifeline.
Businesses will have to adapt their premises, provide PPE to be compliant and ensure a safe environment for both staff and customers. This of course comes at a no small cost, especially when added to the fixed costs of running a closed site since 23 March and the additional costs associated with reopening including marketing, training and safety protocols, and all at a time when cash reserves are already depleted.
Paul Newman, Head of Leisure and Hospitality, RSM, explains how tax cash credits could work: ‘Businesses would ring-fence all site specific expenditure, including rent, incurred between 23 March and additional reopening costs (without having to distinguish whether capital or revenue) and surrender any associated tax reliefs currently available in exchange for an immediate cash tax credit rather than carry forward for future use.
Mr Newman continues: ‘For example, surrendering £100,000 of costs for say a 19 per cent credit would give cash-strapped operators a working capital lifeline of £19,000. The amount of the benefit claimed would be subject to subsequent review/true up as part of the end of year corporation tax return submission. Ultimately, this would not affect the quantum of tax relief achieved but would be an advance of tax relief at a time when it is most needed.
‘This crisis for the leisure and hospitality sector doesn’t end when lockdown lifts. The impact will continue to play out for months to come and this initiative could be the difference between survival or closure for many operators.’