The lockdown period created many new and unfamiliar challenges. Few businesses, have been left unscathed during the past few months. There are still many unknowns ahead, but as lockdown restrictions continue to ease in some areas and schools begin to reopen, businesses too are preparing for the ‘new normal’.
Small businesses have been rightly focused on survival and recovery, but there are a number of policy and broader business updates on the horizon. To help you plan for these, we’ve created a list of things to consider.
Making Tax Digital for VAT It’s been nearly three years since the very first digital tax pilot from HMRC, commonly known as Making Tax Digital (MTD). Initially, HMRC required UK businesses above the VAT threshold to process their returns digitally. It has now been announced that businesses below the VAT threshold must also be compliant with MTD, from April 2022. The self employed and landlords must be compliant by April 2023.
While change is never easy, keeping digital records and filing VAT returns through a professional in combination with accounting software like Xero can actually reduce your workload and improve your agility. Having timely and up to date financial information will prove crucial to monitoring cash flow during these uncertain times.
Brexit It may seem like Brexit has been pushed down the agenda over the last six months – for businesses and the government. But as we get closer to the 31st December transition period deadline, it’s starting to come back into focus again. New policies will likely impact businesses, notably those that trade internationally or have international supply chains. There are still a lot of unknowns, but businesses can keep on top of new guidance, through sources such as the gov.uk/transition website, trade associations, and professional bodies.
For ecommerce businesses, being able to sell globally is a significant benefit, but they also need to consider the impact of foreign income. Even if minor amounts are lost to currency transactions, they can quickly add up. Your accountants is in the best position to advise on ways to minimise potential exchange losses.
IR35 regulation If you run your own business, are self-employed or are a freelancer, then you will likely have heard of IR35. It is a piece of legislation that allows HMRC to collect additional payment where a contractor is an employee in all but name. The legislation has been in place since 2000, but is subject to constant changes.
The latest change was due to be rolled out to the private sector, however this has now been postponed to April 2021 due to COVID-19. Medium to large private sector firms will now take over responsibility for determining whether the contractors they use will be taxed the same as permanent employees (inside IR35) or as off-payroll workers (outside IR35). Despite the delay, if you’re an employer, it’s worth doing an audit on current contractors to see how you’ll be impacted.
Access to finance More than four months have passed since the introduction of the government-backed Coronavirus Business Interruption Loan Scheme (CBILS) and business Bounce Back Loan Scheme (BBLS). The uptake on these loans was massive, but many businesses have struggled to access them and access to finance will be essential to their recovery.
To help, the British Business Bank has now added more than 100 lenders to the schemes – including high-street banks, challenger banks, and regional and specialist lenders. Alternative lenders also tend to be open to new customers – see the full list here. CBILS is currently due to end in late September, so those considering it should talk to their accountant soon, so they don’t miss out. BBLS is currently set to end in November.
Furlough changes The Job Retention Scheme, introduced in April, has been a lifeline for many employers and employees during the lockdown. However, the scheme expires on 31 October, having already disbursed £35.4 billion as of 16 August. From August onwards employers must also start covering National Insurance and pension contributions again.
With these growing costs, businesses need to be forecasting and assessing whether they’ll be generating enough revenue to accommodate these changes.
There are undoubtedly challenges ahead, but the pandemic has revealed in no uncertain terms that with the necessary planning, businesses can adapt and thrive.
If you'd like to chat to us about your small business and how we can help. Get in touch today.