The UK economy continues to take a battering, having been ravaged by the Covid-19 pandemic, with debt levels at a record high of £2.131trn. The chancellor of the exchequer, Rishi Sunak, said he prioritised lives and livelihoods with financial support packages, to help individuals and businesses manage government-imposed lockdowns – requiring unprecedented levels of borrowing. But once the crisis has been averted, and the economy is back on track, government coffers will need to be refilled and debts repaid. Therefore, businesses must get their finances shipshape if they are to weather the next storm.
Mr Sunak has already signalled some tax rises that are due to be implemented over the next few years and businesses need to ensure they are in the best position to cope with such changes. Tax professionals play a crucial role in helping businesses get their house in order, so organisations can cope with increases and maximise finances more effectively. Whilst final details have yet to be fully disclosed, some of the changes tax professionals can help businesses get to grips with now are:
· Tax changes and freezes
It is likely that corporation tax for large organisations is due to rise from 19% to 25% in 2023. As the first corporation tax rise since 1974, Mr Sunak has said the rise is fair as it would only hit companies that had done well through the pandemic. With a significant hike in corporation tax, specialists can help large organisations ensure that they have the funding in place to manage such an increase.
Personal income tax is also due to be frozen from April 2022 until 2026. Some argue that this represents a clear tax rise for all taxpayers over the coming years, bringing as many as 1.3 million people into the income tax system. Tax advisors can support employees with making their personal finances go further, ensuring they aren’t unduly impacted.
· Movement of goods
The advent of Covid-19 dwarfed conversations around Brexit at times, yet businesses are still dealing with the fallout of Britain exiting the EU. Importing and exporting goods has been significantly affected for many businesses, resulting in serious financial implications. Some businesses have had to deal with the impact of delayed goods, whilst others have established new supply chains entirely to circumvent issues. It’s not just physical goods affected either, but the hiring of talent and EU nationals has become more complicated. Tax professionals play a crucial role in supporting businesses with managing a more complex process, as companies look to strike contracts in a vastly different recruiting and trading environment.
· M&A activity
Merger and acquisition activity is seeing a resurgence at present, as some businesses look to takeovers to grow their way out of the economic doldrums. The Autumn budget is also expected to include measures to support such growth,introducing new financial reliefs that attract foreign business and investment for example – all of which will have tax implications. Navigating new business ventures, particularly against the backdrop of operating in a “new normal”, is complex at best and can benefit from support of tax professionals to ensure everything runs smoothly.
Whilst many organisations are still in survival mode, it’s important to look ahead to ensure the business poised for growth. Tax professionals can support organisations with ensuring that business finances are healthy and as future proofed as possible. With many complex financial changes occurring, in part due to Covid-19 and Brexit, businesses that don’t have quality tax professionals on board already should consider hiring talent soon. As the next financial wave is due to hit, businesses need to be in the best position as the economy moves towards recovery.