Operational and financial resilience: Managing tax risk on emerging from COVID-19
The scale of the impending financial crisis following COVID-19 is not yet known, or in the words of the Chancellor, “our economic emergency has only just begun.”
The scale of the impending financial crisis following COVID-19 is not yet known, or in the words of the Chancellor, “our economic emergency has only just begun.”
Given unsustainable corporate debt in the UK alone is estimated to exceed
£100bn, many corporates will need to be resilient to survive. This may be
achieved through operational or financial restructuring.
Financial restructuring may involve debt releases, equity injections and
changes to terms of borrowing. These can have unexpected tax consequences
for the unwary. Tax payment deferrals, such as VAT, may aid tighter cash flow
management.
Operational risks present before the pandemic have been amplified. Now
COVID-19 has added complexities of its own to the picture. These include
disturbances to the supply chain and general operational disruption stemming
from social distancing and hygiene measures – not least the move to mass
working from home, all of which have tax consequences.
