How to sustain the growth of your business in 2020
An annual survey involving 85 leading economists conducted by the Financial Times predicted that GDP growth in 2020 would not significantly improve on 2019. Considering this state of financial affairs, it seems obvious that sustaining growth in the new decade will not simply involve the pursuit of new business opportunities. With a string of changing regulations and dramatic shifts in the political landscape, businesses are best advised to start the year with a comprehensive understanding of what 2020 might have in store for them. In this article, we outline the technical and regulatory changes to expect in 2020 and how you can ensure your business is not adversely affected by these challenges in order to sustain growth, build on 2019 and defy the predictions by celebrating another lucrative year.
Surviving Brexit uncertainty
With a new Conservative government that enjoys both a healthy majority and a strong mandate for Brexit, businesses can finally look to the future without that niggling sense of ambiguity that has dragged on for the better part of three years. On 31st January 2020, Great Britain moved forward with its withdrawal from the European Union (EU) and entered into a transition period. This geopolitical manoeuvring will have obvious and dramatic repercussions for small, local businesses and larger, national businesses alike. While it is difficult to predict the precise outcome of the discussions and its influence on current EU tax and accounting protocols, we do know that negotiating the departure from the EU is likely to create a new set of conditions. These conditions will be important to navigate in order to sustain growth in 2020.
The Great Reform Act will see the UK convert existing European legislation into UK law, retaining elements that the government deems ‘practical and appropriate’. When considering this in conjunction with the timing of Making Tax Digital (MTD) discussed below, it can be expected that there will be plenty of movement with regard to the tax and accounting world this year and beyond. Dramatic changes will also be made to prevailing customs and excise duties, direct and indirect taxes, and other regulatory reporting obligations.
A survey by Wolters Kluwer found that 45% of firms intend to offer more advisory services to assist their clients in dealing with the impact of Brexit. The poll found that many accountants have noticed a significant upswing with regard to the number of clients approaching them for professional advice on the potential risks of Brexit. Managing Director of Wolters Kluwer Nancy McKinstry said: “While there continue to be uncertainties, Brexit offers many opportunities for accountants”. Spotting opportunities such as these will be instrumental in helping finance leaders stay ahead of the competition to sustain growth in 2020.
On 7th January 2020, the government announced a review into the current IR35 off-payroll changes. While we will have to wait until later in February 2020 for the review to be completed, businesses will need to ensure that they are moving ahead with current plans for IR35 ahead of the April 2020 deadline if they want to sustain growth.
As they stand, the main reforms can be summarised thus:
- End clients will be responsible for determining whether contracts fall inside or outside IR35 regulations.
- Small businesses with turnover below £10.2m and fewer than 50 employees will be exempt from the new rules.
- The end client will be obliged to confirm IR35 status of contracts by delivering a Status Determination Statement (SDS).
- The end client is responsible for arranging considerations of any disputes from personal service companies (PSC) about SDS.
- The 5% administration allowance has primarily been withdrawn.
The above will affect contractors working through a personal service company, recruitment agency or any medium-size and large-size end client. Therefore, accountants are advised to check on any government updates regarding the IR35 re-evaluation and prepare accordingly in order to sustain growth and avoid any pitfalls presented by the amendments.
Making Tax Digital (MTD)
Making Tax Digital is a compulsory requirement of HMRC that dictates businesses must transition tax affairs to a new digital format through the use of online or cloud-based accounting software or electronic application. With the soft landing already rolled out, 2020 will see a number of regulatory changes to the existing system that pose challenges to businesses, accountants and auditors. The three big changes for 2020 involve the introduction of financial penalties, the phasing out of manual inputting and the implementation of data transfer via compatible software supporting a digital link when submitting taxes. As it stands, it is obligatory for VAT-registered businesses with turnover exceeding the threshold of £85,000 to maintain digital accounts and to submit their VAT returns directly through MTD-compliant software.
If they are prepared to implement these changes ahead of the deadline, finance leaders will enjoy a more centralised perspective that encompasses all of the company’s tax information, liabilities and entitlements. Accurate and efficient online accounting and bookkeeping software such as that provided by Access Group will help you integrate directly into the new system of MTD, helping to make recording, analysing and transmitting tax information to HMRC as effortless as possible. With this technology, you can appraise your client base and assess exempt clients who fall below the VAT threshold in order to prioritise, while recognising specific clients who may require additional assistance in transitioning to the new digital environment.
If they wish to sustain growth in the long term, accountants and finance team leaders will need to prioritise educating their team on HMRC amendments and proposals while keeping on top of technical issues and government announcements. All of which will need to be conducted between now and April 2020 when new rules come into effect. This will also involve implementing an educational campaign to enlighten clients and senior management teams on the benefits of going digital, which include:
- Increased accuracy and error reduction
- Up-to-date understanding of taxes owed
- Reduced chance of audits and compliance checks from HMRC
- Online bills, meaning taxes can be paid immediately
- Faster, simpler processing
The bottom line
All of the above will mean finance leaders will enjoy more time to sustain and grow their businesses. Ensuring compliance with the new regulations will not only keep HMRC happy, but clients and senior management teams will be assured and satisfied as well.