Tax planning for an unknown future
The Imprudent Accountant suggests that this is the moment to begin to consider future tax planning strategy.
There seems to be a general consensus among economists that the government is going to have to increase taxes significantly at some point in the not-too-distant future. Even the chancellor of the Exchequer struggles to play down the prospect.
We have all seen suggestions that such action might take place imminently, but most experts seem to feel that both individuals and the beleaguered business community need support to survive at the moment so tax hikes will have to wait.
What I do know is that any competent accountant should immediately see this as an opportunity to generate new business from existing clients and, arguably even better, a chance to get ourselves out into the market with a valuable and much-desired product.
A chance to save some money
It has become a truism that clients are reluctant to pay substantial fees for compliance work such as audits or basic tax return work. This situation will only get worse when they are struggling to make ends meet.
The high value work for which clients are happy to pay premium fees arises when there is an opportunity to save someone some money.
We all have our favourite examples, but these might include facilitating a business purchase or sale, negotiating a great deal with HMRC or possibly introducing a means of reducing overall tax liabilities, either now or further down the line.
The combination of Covid-19 and breaking ties with the European Union is creating an almost unimaginably large black hole in UK plc. This increase has expanded my vocabulary with the introduction of a measure with which few of us have been familiar until the last few months, the trillion.
The trillion pound challenge
Even worse, rather than defining the budget surplus that our government would love to share with its citizens, this is the expression of a deficit. While the United States has luxuriated in its trillion-dollar deficit for some time, this is yet another example where the UK is following their lead. The fact that our deficits are represented by pounds sterling is likely to be a moot point given that the two currencies are slowly trending towards parity.
In recent years, tax levels have generally been stable or reduced across-the-board. Therefore, the tried and trusted techniques of tax minimisation when increases were on the horizon have largely gone out of fashion.
Given all of these factors, it is time that we began to dust them down and start to consider what might be most appropriate on the basis of our expectations regarding future tax policy.
I do have to acknowledge here that the position might be complicated even further by the financial straits in which so many clients will find themselves.
However, there are likely to be clear benefits to both individuals and corporates, provided that they are willing to gamble on the future.
I do not want to spoil readers’ fun by suggesting specific tax saving measures that could be effective, partly because AccountingWEB does not want to get sued if something goes badly wrong, but more particularly as there are far too many variants available.
Put simply though, there could, for example, be chances to make strategic use of losses, or savings could be made by taking a few simple steps to ensure that profits fall into years with lower tax liabilities rather than higher.
What all of this means is that, at a time when most of us are finding income streams diminishing, there might be some genuine marketing opportunities available that can promote the kind of work that is not only intellectual challenging but also very lucrative – ie our favourite types of work.
To get you thinking, there could, for example, be chances to make strategic use of losses or savings could be made by taking a few simple steps to ensure that profits fall into years with lower tax liabilities rather than higher.
If any of you are ahead of the game and have already begun to advise clients on worthwhile schemes and plans are guaranteed to second guess the Chancellor, we’d love to know.