Talking Tax – Building Business Resilience

The economic landscape has changed exponentially over the last few months for every individual and organisation regardless of sector or geographical footprint.

Vanessa Lee, Tax Partner at accountancy and business advisory firm BDO, here looks at why tax measures need to be balanced to have a positive impact on recovery after the impact of Covid-19.

FIND OUT MORE: For information about services provided by BDO visit their web site at www.bdo.co.uk.

Nothing has been left untouched by the global pandemic, not even the topic of tax.

The significant and immediate measures introduced early in the crisis provided some degree of breathing space to businesses and individuals. This unprecedented pandemic has seen the implementation of far-reaching Government arrangements, such as VAT, PAYE and NIC deferrals, the introduction of the Coronavirus Job Retention Scheme (‘CRJS’) and exceptional concessions to tax residence.

Inevitably, further steps are needed and more traditional tax measures will follow, coinciding with evolving sentiment from HMRC.

An example of this may include a refocus on Time to Pay arrangements, which enables businesses and individuals facing financial difficulty to agree affordable payment options with HMRC and a review of the application of the CJRS.

The speed of recent tax policy implementation leads to nuances in the legislation. Businesses should consider if they have taken a reasonable position on ‘grey areas’ should HMRC enquire in the future.

Despite the challenges, businesses have adapted, evolved and innovated, particularly in where they source products from and how they deliver their services - we have many shining examples in the region.

Change inevitably presents tax consequences, for example, additional tax relief via research and development tax credits, versus potential unforeseen obligations. Innovation should not be discouraged, especially in times of adversity, but the tax implications of such change should always be considered.

The Chancellor announced the next wave of measures in his Fiscal Stimulus with much speculation around funding for training schemes, infrastructure and the tech sector, supported by potentially helping small businesses via NIC reductions.

It is worth remembering that the Conservative manifesto pledged a triple lock on raising income tax, VAT and NIC for five years.

We have already seen some countries seek to boost consumer spending via specific VAT reductions and even a short-term decrease would be beneficial for certain sectors – particularly hospitality and leisure, which have been severely impacted.

With unparalleled levels of spending to support the economy and further increases to the national debt, it is realistic to expect future tax increases.

To be successful these will need to be balanced so as not to negatively impact the fragility of recovery..

* Vanessa Lee is Tax Partner at BDO. She leads the Private Client Tax team across the North and the firm’s UK matrimonial team, email her at [email protected] or call 07796135824

LINKS:

Web: www.bdo.co.uk

Facebook: www.facebook.com/BDOLLP

Twitter: @bdoaccountant

LinkedIN: www.linkedin.com/company/bdo-llp

YouTube: www.youtube.com/user/bdollp

Instagram: www.instagram.com/bdo_uk