The past weeks have seen some truly frantic action on both sides of the Brexit lines with both the UK and EU contingents trying to steer a course through the choppy seas, and bracing themselves for impact. The time for negotiations is all but up for Theresa May, with a deal yet to be confirmed with the EU at the time of writing.
You can read the entire proposal agreed with the EU, but save yourself some time and read our summary of how Brexit may impact business accounting and finances. May’s proposal will see the UK face many difficulties, but the outcome of the Brexit negotiations depends on whether the deal is approved, or not.
You will already know that there are two possible outcomes. Either the proposal is approved, or Theresa May is denied her deal. The former may lead to longer-term confusion and difficulties. However, the latter would mean significant short term uncertainty which would be alleviated in time, after the transition period.
What this article aims to tackle is the question of how Brexit will impact professional accountants, tax advisors, and the kind of effect our clients can expect to feel. Since the Brexit result was announced uncertainty has slowly crept into the lives of every person in the UK. In the last few weeks we have seen the pound fluctuate, hitting all-time lows before achieving a degree of stability again. What many from the business community are asking their accountants is what will definitely change, and what will not change.
What we have determined is that there are 4 ways that things may change for your business’ accounting and taxes:
1. Guidance will need to be offered in a timely fashion by all relevant advisory service providers.
2. The UK government will need to develop a greater presence when it comes to Corporation Tax.
3. Changes, such as the Flat Rate Scheme (FRS), will have an impact upon VAT.
4. Issues, such as FRS, will also have an impact on accounting and the law.
Let’s take a look at these four elements in a little more detail and spell out what we have been able to deduce so far.
1. The Advisory Services
Sooner rather than later, businesses will need dependable advisors who will have an in-depth knowledge of the forthcoming changes. These changes will spread and have far-reaching consequences throughout the taxation and accountancy processes and systems that are currently in place.
So many of the regulations and laws governing the accounting and taxation advisory profession are either linked to EU principles, or directly overseen by directives from the EU. This means that it will be necessary for the UK government to roll out a raft of changes to meet the needs of different users as the economy reacts to the various changes.
2. Corporation Tax
It is very likely that Corporation Tax will undergo some severe changes. These will include the need for it to have heavier regulation from the UK government as we transition in the months and years ahead.
Some of the biggest issues to cast a shadow over larger businesses that operate and trade outside of the UK will be:
● Double taxation
● High rates of tax
For companies that keep their operations within the UK there will also be changes ahead. These will most likely appear in the way of tax hikes.
Despite VAT being an EU concept that the UK government of the time readily put into practice, it is highly unlikely that the UK government will now look to get rid of VAT. Such is the massive revenue stream from VAT to the national economy that the government will sooner change VAT rates, rather than declare it obsolete and remove it altogether.
Any changes in VAT will necessitate a reaction, and development of new accountancy practices. It will be imperative for all types of businesses to readily adhere to any changes to the way VAT is handled. You can count on us to guide you through all the changes relevant to your business.
4. Legal Aspects of Your Accounting
The Flat Rate Scheme has had the additional result of major changes for the way that your financial reports are compiled. Brexit will lead to further changes as the ties that bind UK regulation to EU directives are removed. The UK government will be keen to remove the impact of EU directives that do little to improve things for UK businesses.
In their place new policies will be created to more directly benefit UK businesses and the UK government. How these new regulations will come into force, and impact the economy, remains unclear, but this will result in a raft of changes.
Some Words of Advice
There is a lot of speculation across all sorts of media, and it is tempting to get caught up in it all. However, until things become clearer about the long-term effects of Brexit, it is advisable to keep an open mind so we can weigh up the firm facts when they do finally arrive. You’ll know by now that we always keep ourselves up to date with the latest developments, so you can count on us to give you the right advice whatever occurs.