With a general election taking place in a couple of weeks, it’s more important than ever that accountants can find the information they need for their clients.
It’s why we launched our accountants hub that’s specifically to help accountants find the information they need for their clients.
We know more of you are coming to the site and reading our blog so as well as the latest interesting insolvency stories and news every week, we’re now curating a regular monthly round-up for accountants of the items they might have missed but are worth checking out.
Let us know what you think on our social channels or at ask@businessrescueexpert.co.uk and we’ll tailor our future updates closer to what you’d like to see.
Election promises
We’ve looked at what the priorities are for each of the main industrial sectors in the general election and what the main parties’ manifestos are saying specifically about business – but what will the immediate tax changes and improvements to HMRC look like?
Both the Conservatives and Labour have indicated that they will not raise income tax, national insurance or VAT for average households – instead any additional spending promises will be funded by raising between £5 and £10 billion by clamping down on “tax avoidance” – but what will this actually look like?
HMRC can always reduce their level of errors and mistakes potentially using AI more effectively. A new crypto assets disclosure scheme will also contribute because guidance is still relatively opaque at the moment
Chris Horner, insolvency director with BusinessRescueExpert, said: “Technology is going to have to be a huge part of HMRC improvements.
“For example, AI could help them target and focus on available data before spending more money and allocating more staff to do deeper dives into company tax affairs.
“AI can look for patterns of data and identify industries that haven’t been previously targeted to obtain more data and flag any emerging areas of concern.
“If they also improve their guidance and support network for directors who are doing the right thing and attempting to pay their fair share thanks to their accountants then this could also increase returns and save a lot of time and money that could be better allocated elsewhere.”
One of the main areas of concern in the annual HMRC tax gap figures is the level of non-compliance by small businesses.
Larger firms have a dedicated CRM within HMRC that makes it easier for them to have a point of contact but if they introduced a small business relationship manager or system then this could transform compliance.
Even specialist tax advisers find it difficult to get support on occasion with long wait times or being transferred between departments when a single point of contact would speed up cases and make it easier for everyone involved.
Crypto confusion?
From April 2025, all self assessment taxpayers will have to disclose their crypto investments on tax returns. For now HMRC has released a crypto assets disclosure to encourage taxpayers to disclose any untaxed earnings up front.
This is an area that will see an increased focus and accountants will have to pay more attention to their clients activities in this area as many expect enquiries and investigations to rocket in the coming years.
S1 and S2 accounting standards adoptions
Dates for endorsement of the International Sustainability Standards Board’s IFRS S1 and S” standards have been announced, ending speculation over timescales for new reporting requirements.
The UK will make endorsed International Sustainability Standards Board (ISSB) standards available in Q1 2025 according to the government’s latest Sustainability Disclosure Requirements Implementation Update.
The endorsement process will assess the standards and will conclude with the publication of UK Sustainability Reporting Standards, subject to a positive endorsement decision.
Following this the Financial Conduct Authority (FCA) will be able to use the standards to introduce sustainability-related financial reporting requirements for UK-listed companies.
The government will also decide on disclosure requirements for non-listed companies, taking into account the costs for reporting companies and the benefits for investors wishing to use sustainability-related information.
A decision on future requirements is expected in Q2 2025.
Considerations around exemptions from pre-existing requirements in the Companies Act 2006 for companies that are using the standards on a voluntary basis will also be taken into account in the second quarter of 2025.
Given timelines for consultation and the introduction of new legislation, any requirements are unlikely to be introduced earlier than accounting periods beginning on or after January 1st 2026.
Finance Act (No.2) 2024 Receives Royal Assent
Some financial legal changes announced in the 2024 Spring Budget have become law.
The Finance No.2 Bill 2024 (also known as Spring Finance Bill 2024) received Royal Assent on May 24th 2024, becoming Finance (No.2) Act 2024. This is the final stage of a bill’s passage through Parliament and at this point becomes law.
Among the measures included are:-
- Reduces the higher rate of capital gains tax (CGT) for residential property gaines from 28% to 24% with effect for disposals made on or after April 6th 2024
- Increases the thresholds for the high income child benefit charge (HICBC) for 2024/25 and subsequent tax years. The lower threshold increases from £50,000 to £60,000 while the higher threshold increases from £60,000 to £80,000
- Abolishes multiple dwellings relief for stamp duty land tax (SDLT). This measure applies to land transactions where the effective date falls on or after June 1st 2024, subject to transitional arrangements
- Ensures that individuals cannot bypass the transfer of assets abroad (ToAA) anti-avoidance legislation by using a closely-held company to transfer assets offshore
SME threshold will cut accounting costs
A new consultation, launched before parliament dissolved, is hearing views on a proposal to change the threshold size of SMEs and will remove the limited requirement for issuing a strategic report.
The proposal, which is included in the Conservative manifesto, would see a medium sized company have the maximum number of employees doubled from 250 to 500 which according to supporters could see SMEs collectively save an estimated £145 million due to deregulatory requirements.
The Department of Business said that a typical small company would save ten hours of reporting and accountancy time a year.
This would also mean that 5,000 more large companies would be reclassified as medium and 14,000 medium sized businesses would be reclassified as small. A further 113,000 small companies would be reclassified as micro businesses which would allow them to file simpler accounts.
The monetary limits have already been increased to an annual turnover of not more than £54 million for medium businesses; no more than £15 million for small businesses and £1 million or less for micro businesses.
The consultation closes for submissions on June 27th 2024.
Accountants Recruitment Issues
New research has found that nearly half of accountancy firms are significantly or severely being affected by skills shortages and nearly three quarters said the shortages have got worse than three years ago.
This indicates that the industry is facing an existential crisis that lays bare an ever-widening chasm between the increasing demand for accountants and a shortening supply of available talent.
Reasons given range from more competition from similar firms to fewer people attending and graduating university as well as the lingering effects of the Covid pandemic and an ageing workforce.
Vipul Sheth of Advancetrack, who carried out the research, said: “This shows how the acute lack of accountants has emerged as a critical bottleneck and its impact has been nothing short of severe, impacting businesses, institutions and economies on a global scale.
“It’s made clear how everyone, from multinationals to SMEs, are struggling under the weight of these significant challenges. Without skilled practitioners and a robust sector to oversee financial transactions, tackle regulatory complexities and ensure compliance, the stability of modern commerce is genuinely at risk.”
Davids and Sarahs most likely to become accountants
According to over a million LinkedIn profiles, you are more likely to work with a David or a Sarah than any other name in accountancy roles!
Approximately 9% of all accountants that identify as male are called David while the most popular female equivalent is Sarah with 11%.
After David, the next most popular names for accountants were James, Andrew, Stephen and Paul. Following Sarah, Emma, Samantha, Rebecca and Laura were the most popular for females.
David and James were also the most popular names in ten other sectors which implies wider demographic trends at work.
Researchers said: “People who grew up in the 1980s and 1990s will probably remember at least one Sarah, David, James or Emma in their school if not several. These people are now well into their careers, so it stands to reason that their names crop up so regularly in the workplace.
“It will be interesting to see whether any of today’s most popular current baby names such as Noah, Mohammad or Olivia, replace the David’s and Sarah’s in accountancy a generation from now and whether names like Gary and Susan, the eight most common name in the workplace, could disappear completely after falling out of favour.”
HMRC Rejects 17% of VAT Registrations
As more businesses seek to apply for VAT registration, figures show that HMRC have refused more than 17% of them last year.
314,000 companies applied in the last financial year of which 261,000 were successful. 52,000 applications were rejected while a further 1,000 were withdrawn.
HMRC maintains that they are clamping down on fraudsters with some illicit traders facing substantial penalties but some accountants claim that their excessive caution is a deterrent to growth.
Several accountants have noted that VAT applications are complex and HMRC experts are increasingly difficult to reach on their own helplines with an average wait reaching 25 minutes last year.
The main reasons why HMRC reject VAT registrations is because of incorrect or incomplete information or because of a misunderstanding of the business’ activities on behalf of the HMRC.
Any inconsistencies could easily result in applications being rejected which also explains why the number of withdrawals also increased as applicants realised they could not meet the basic requirements threshold.
Media companies facing R&D crackdown
HMRC are questioning three in four R&D tax relief applications from media companies in the past year.
Over 55% of firms are applying to make an R&D claim but only a quarter of these are being approved without any dispute.
A third end up having their claims approved after HMRC challenge them but another third have theirs refused.
20% of all R&D claims are challenged by HMRC, more than double the amount of media companies who cover sectors such as audio, music, film, TV, marketing, advertising and gaming.
There were 90,315 R&D claims in the previous financial year with a total of £7.6 billion paid in tax relief.
In the same period there were less than 1,000 R&D claims for the whole arts and recreation sector amounting to approximately £100 million. As a comparison the manufacturing sector saw 21,000 claims and over £1.5 billion in claims.
Accountants specialising in the media sector are worried that the HMRC’s seemingly overaggressive approach is stifling innovation and holding back their competitiveness.