Tax clampdowns and audit squeeze behind drop in firms

by Calum Fuller

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26 Aug 2014

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HMRC building

AN INTENSIFYING SQUEEZE on audit work and tax is seeing the number of accountancy firms fall, according to finance provider LDF.

Figures from the firm show that there were 6,962 accountancy firms registered in the UK in 2013, a 4% drop on the previous year when there were 7,239.

Although there has been a sustained downward trend since the credit crunch, the rate of decline slowed to 1% in 2011 and 2% in 2012.

Firms with between two and six partners have seen the biggest decline, with a total of 2,997 registered firms in 2013 compared to 3,264 in 2012. However, the number of firms with between seven and ten partners increased to 202, up from 191 the previous year.

Pressure on tax planning work from HM Revenue & Customs and the loosening of rules requiring businesses to undertake audits is behind the fall, LDF managing partner Peter Alderson claimed.

He said: "On the face of it, the economic recovery should be providing more work for accountants as businesses activity picks up, and high margin work such as corporate finance and M&A starts to make a comeback. However, although the general outlook is improving, audit volumes are under severe pressure.

"Firms which have been reliant on audit work as a steady and vital source of income are having to re-evaluate their business models. To remain viable, one of the options open to them is to join forces with others in order to consolidate and generate economies of scale."

He added tax planning is "fraught with many more risks for clients and advisers than it was".

"Many schemes have been closed down completely and the scope for identifying legitimate new ones dramatically reduced. So there are now far fewer opportunities for
firms to help their clients in this way," he said.

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