Brexit and Making Tax Digital on the horizon in another busy year to come

With a new year ahead, AAT looks forward to see what we can expect from 2019.

Vernon Anderson FMAAT, AAT President

Brexit

In 2019 there’s little doubt that focus in the wider environment will be aimed at Brexit. Despite the political wrangling to decide what deal will be best, the UK remains set to leave the European Union in March. The type of deal obtained will have a huge impact; a ‘No deal’ exit is likely to have a damaging effect on the economy.

No matter what deal is secured, we will need to adapt. Opportunities should arise for accountants to show value in advising their organisations, along with increased apprenticeship opportunities as reduced EU migration means companies need to train more skilled employees.

Making Tax Digital

The timetable towards initial Making Tax Digital (MTD) implementation continues apace. The MTD pilot service is already open to around half a million businesses, but by April it will be mandated for all customers to ensure they are using software to submit VAT returns. We’re confident that the scheme will ultimately prove fruitful and bring clients into the digital age.

While the Brexit and initial MTD implementation dates are early in 2019, no doubt things will take time to bed in, and as such there is great uncertainty around. However, it’s safe to say that those who’ll be best placed to maintain success in 2019 will be those who prepare. Making sure you have the right skills will be vital; recent research from AAT has shown that skills such as communication, adaptability, and problem solving will always be in demand, whatever the external circumstances may be. Improving and maintaining those skills should stand you in good stead.

Mark Farrar, Chief Executive, AAT

Brexit

I remain concerned about the impact that Brexit will have on small businesses that currently trade with the EU, and the additional requirements new customs procedures will place on them after we leave. Small businesses will need to spend time and resources adjusting to the new requirements, which many can ill-afford.

That said, I believe that our government and indeed the wider Parliament will find a way to avoid a ‘no deal’ scenario, and the damage that would do to the UK economy. AAT and our members will have a role in guiding businesses as and when more clarity appears, to help them adapt to the coming new changes.

Technology

As well as Brexit, we must remember that underlying changes such as the increasing adoption of technology, including automation and artificial intelligence, will continue to change the wider accounting sector. I believe the pace will quicken in 2019.

Apprenticeships

I’ll be watching closely to see if 2019 is the year that the apprenticeship levy is embraced by businesses of all sizes, leading to an uplift in the number of starts. Although apprenticeship starts in the accounting sector have performed very well, increasing by 12% in 2017/18 compared to the previous year, other industries have seen a decrease, meaning there is still much work to do to educate smaller companies in particular as to the advantages apprenticeships can bring. In 2015 the government set their target of getting three million apprenticeship starts by 2020, but the target looks certain to be missed. We will see whether the government will announce any adjustments to the target or drop it altogether.

Brian Palmer, Tax Policy Expert, AAT

Hands off our tax system!

Accountants and small businesses, like the rest of the country, start 2019 by playing the waiting game, as the Government attempts to land a Brexit deal. While there’s many conflicting voices as to what exactly that deal should include, I am convinced what we need most importantly is some certainty, so that businesses can start planning for the future.

In the meantime, I hope that the Government suspends unnecessary, non-Brexit related, tax changes which it might be tempted to implement and which are likely have a heavy administrative impact on UK-plc. All at a time when businesses will be struggling to cope with the rigors of whatever Brexit throws at us.

One must recognise, in post-Brexit Britain, Westminster will have to take some hard decisions, some of which are likely to require changes to the tax system. All I hope, if this turns out to be the case, is that the Government will not be tempted to make ‘changes for changes sake’, and that the benefits of any changes deemed necessary are carefully weighed against their potential administrative impact on businesses.

Devolution, tax avoidance, and IR35

In this vein, I hope that the pace of divergence in tax rates between the home nations of the UK under our devolved Parliaments is slowed. I urge each Parliament to adopt a measured approach to taxation, and not bring in policies that lead to further complexity for taxpayers already struggling to cope with the growing divergence in tax rates.

Similarly, while AAT is supportive of the Government’s objective of bearing down on tax avoidance in recent years, there’s now whole rafts of legislation in this area. In my view these now need time to bed in, in order to measure the effect of the changes.

Finally, given the lack of evidence that the off-payroll rules have worked to date within the public sector, it was a welcome part of the Chancellor’s recent Budget statement that the introduction of new rules determining the application of IR35 in the private sector have been delayed to April 2020. A great deal more work needs to be done to define those who should be taxed as employees, and then businesses need ample time to prepare. This is why AAT has always suggested that the earliest implementation date should be 2021.

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