Accountancy is a funny business sometimes. While most owners and management teams are aware of the role we play in everything from reaching the financial objectives of a business, to something as simple as making sure you are claiming back the VAT on your minor expenses, people still often underestimate the additional value a good accountant can bring. The amount of interaction you have with your accounting team is up to you of course, but that said, your accountancy support should really also be working behind the scenes on your behalf. At the moment that is probably just as valuable as any of the more visible services we offer. Bearing in mind the wide range of small to mid-size businesses that service the Milton Keynes area, now is very much the time to cosy up to a good accountant. Here is why:
You know all that money that H.M. Treasury spent on Covid support? Well, at some point they are going to need to take it back. Thanks to the pandemic they will also need to do this after a period of economic downturn where less tax has been generated. It’s estimated that over 190bn has already been spent on business relief alone and with everything else to add in the mix we are looking at some unimaginable numbers. Even if there are no further significant effects from the pandemic and the economy bounces right back (which we all hope it will) the Government will still need to raise an unprecedented amount of money to recover the money they spent. When they do, they may well come knocking on the door of the SMEs for some of it. That probably means more tax, potentially less profit and certainly new ways of interacting with the revenue service.
Where is the money coming from?
In short, nobody really knows. In fact, where the money will come from to pay for the covid relief is still a matter of some quite heated debate. In all fairness there are a few economists who think that the deficit can be covered in borrowing due to the current low interest rates. Other methods such as quantitative easing, a rather odd sounding method where the Bank of England buys government bonds, and rounds of investment from other sources will almost certainly be employed first. In the end, we don’t know. Sorry, the crystal ball is out of order on this one.
Raising taxes for individuals would be a difficult ‘sell’ to the public as they will already be financially reeling from the effects of the pandemic and, to be a little cynical, governments that raise taxes are not going to be popular at the hustings. Tax though, is the obvious choice for filling in the shortfall. While many have praised the relief given to some sectors through furlough schemes and help for the self-employed, others point to the lack of support for directors of SMEs as an indication of their unpopularity with the Chancellor or Exchequer. To be even more cynical then, SMEs would be a quieter target for tax increases than the general voting public regardless of who is in number 10. Whatever happens though, it would seem likely that the old system of tax is going to come under scrutiny and one area that seems likely to go under the microscope is that of dividends and corporation tax.
Maybe the changes will not come and perhaps the economy will bounce back fully. Maybe government borrowing will cover everything, and this will all blow over. Let’s hope that is the case. If it doesn’t, if the tax system is changed for businesses, then you really need to have a proactive accountant in your corner.
I genuinely hope we are wrong; I hope it all goes swimmingly, but the evidence, and the expert opinion, is suggesting something is coming. Sorry if this article sounded a little pessimistic because we aren’t. We are seeing a lot of our clients picking up again remarkably quickly, so we have a real optimism about the place at the moment. As someone in the office said the other day though, ‘Optimistic is good, prepared is better’. Part of our process here at N-Accounting Milton Keynes, is to review any changes as they happen not just for how they affect the system but in context of what that means to you. On a side note, we would like to say how much the many comments we have had thanking us for our support during the pandemic meant to us. We really do get a kick out of knowing our advice and services helped in a difficult time. Our advice right now is that since nobody is sure what will happen in the next few months, you need sure you have an accountancy partner who is agile enough to react to the changes on your behalf.