Policy developments that will affect accountants in 2024

As 2023 draws to a close, we look ahead to next year, when we hope to see significant progress in a number of areas of regulatory reform.

The year ahead certainly promises to be a busy one, not least with a general election in the offing. From an AAT perspective, with a series of mooted regulatory and compliance changes coming down the pipe, we hope to see real progress in 2024. From off-payroll working calculation of PAYE liability in cases of non-compliance to implementation of R&D tax reliefs reform, no doubt policy makers, civil servants and their counterparts in the profession will have their hands full in delivering necessary reforms.

At AAT, our general outlook and approach will remain the same: above all we value clarity and speed when it comes to regulatory reform. And while we recognise it is unrealistic to expect that all of our asks will be reflected in every new development, by making timely and clear decisions based on meaningful consultation the government can go a long way to enacting effective reform.

Because make no mistake, we are in difficult times both for businesses and the profession. The economy continues to struggle, and political expediency and turmoil (of which both we can expect more in 2024) can often get in the way of enlightened policy making.

Recognising the impact of those disruptive factors doesn’t detract from the fact that further work towards a fairer and simpler tax system would offer immediate benefits. We have been clear both in public statements and in our responses to government consultations that the current tax system is failing to meet this objective.

Making Tax Digital

For the year ahead, then, we would like to see government really get on top of some key issues around tax. Firstly, we must see some progress on the next iteration of Making Tax Digital (MTD). The recent scathing report from the PAC made it clear that MTD for Income Tax Self Assessment is in real danger of failure without some significant improvements in HMRC’s performance.

Many of the promised benefits of MTD centre around the move towards a fully digital tax system. And while we support that aspiration, once again it’s important to point out that simply digitising a system doesn’t necessarily make it simpler or more effective.

That simplification must be a central priority of any reforms in 2024. The arguments may sometimes get drowned out by new initiatives, but tax simplification for SMEs can improve compliance and productivity, something the UK desperately needs.

R&D tax credits

Take R&D tax credits: Some members may feel that the regime governing R&D tax reliefs is under constant review, but 2023 was a year in which the government did at least confirm that some significant reforms would be introduced in 2024. The principal change is the decision to merge the RDEC scheme with the SME intensive scheme in order to provide a simplified system for businesses and encourage more R&D investment.

The decision was very much in keeping with our support for a single merged scheme that we felt would be beneficial for R&D investment, as well as being fairer, simpler and more transparent. The decision on future reforms also aligned well with our suggestion that the government make efforts to truly incentivise SMEs to invest in R&D. It’s been confirmed that rules will be introduced to complement the SME intensive scheme which was announced at the 2023 Spring Budget.

But there needs to be real action around the significant increases in costs of the SME scheme driven by the many unregulated advisers currently operating, as well as increasing awareness among SMEs of their eligibility for the various reliefs.

Late payments

SMEs will also hope to see real progress on tackling late payments – currently around 50,000 firms are closing each year due to cash flow problems. The ongoing pressures felt by smaller businesses in relation to late payments were the subject of a welcome report earlier in the year. The report built on and incorporated responses to the consultation on the Payment Practices and Performance Regulations 2017, as well as the statutory review of the role of the Small Business Commissioner.

While no specific timetable has been given for the implementation of the measures set out in the Government’s Payment and Cashflow Review Report, we are hopeful that primary legislation may come forward in 2024 to make the reforms permanent. In doing so, and in implementing measures such as making the Prompt Payment Code compulsory for organisations with more than 250 employees, the government would go some way to creating a fairer and more supportive environment for smaller entities in the UK.

Regulating accountants

Finally, with all these challenges facing businesses, 2024 would be an ideal time to make progress on the requirement for all paid-for tax advisers and accountants to be a member of a recognised professional body.

It’s a cornerstone of AAT policy that unregulated accountants and advisers – who currently make up one third of those working in the sector – are brought under a professional standards umbrella. We have taken, and will continue to take, a positive and pragmatic approach to this. Our Accountable campaign makes it clear that compulsory membership of a recognised professional body is an effective, low-cost solution that benefits business and the taxpayer.

As with every issue raised here, at AAT we are committed to making the voice of AAT members and the wider profession heard throughout 2024.

Adam Harper is AAT's Director of Professional Standards & Policy..