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Taxes: Good for business, bad for our pockets

With few alternatives, it seems inevitable that the coronavirus pandemic will lead to higher taxes. The Imprudent Accountant considers the future of tax and what might be expected from the 2021 budget regarding UK tax.

22nd May 2020
Partner An unnamed firm
Columnist
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Bulb with tax light inside
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At the moment, accountants seem to be falling over themselves to furlough admin staff and students. Some are undoubtedly going much further and cutting things to the bone while they see how much longer the lockdown lasts and wait to discover its longer-term impact on clients. Those clients are suffering to greater or lesser degrees, many needing bailouts from the government to survive from week to week, let alone into the future.

On top of this, there is a business rate holiday, companies like Virgin Atlantic are demanding funding and, more justifiably, the health and care sectors are receiving a financial boost. At the same time, half the country is closed down, with the rest working way below full throttle.

Short term plan: Getting out alive

All that most of us care about, in the short term, is getting out of this horrible predicament alive, preferably with their jobs and/or businesses intact, if far from the position that they were in around the middle of March.

In stark terms, the government has already signalled the need to borrow more money than it saved throughout all of the years of austerity at the same time as tax revenues will tank. Indeed, one of the novelties of this bizarre situation is to see the government HMRC reversing the flow of money so that the PAYE system is now used to pay out cash rather than receive it.

To compound all of these problems, I cannot be the only person who is struggling to conceive any way that public spending can be cut much further than it has already following a decade of concerted effort. It has surprised me that so few people have been asking how we are going to pay for it.

Tax: The only place to turn to

While interest rates are low, the idea of having the state borrow unimaginable amounts is tenable. Given everything else going on, that may not last. The industry is going to take a long time to recover, while the departure from Europe is not going to be good news financially, in the short term at the very least.

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