The top three issues that the next government must address for accountants

The top three issues that the next government must address for accountants

What policies should the new government place at the top of their agenda for the accounting industry? Making Tax Digital, IR35 and late payments are all issues that need addressing

What policies should the next government place at the top of their agenda for the accounting industry?

Making Tax Digital, IR35 and late payments are all issues that need addressing. Ed Molyneux, CEO and co-founder of FreeAgent, explores why they should be top priority in the coming months.

Only two years after the UK last took to the polls, we may not have thought that we would be here again so soon. But the latest general election provides another chance for accountants to send their message to Westminster.

The industry continues to go through change at an unprecedented rate, and several big issues now need tackling at the policy level. A new government means a new opportunity for us to press the case once more.

So, what are the priorities that the new team should be focused on?

Get digital tax back on track

It is the biggest tax initiative in decades, but the election has muddied the water on Making Tax Digital (MTD) somewhat – with some reports claiming that the legislation has been delayed or even scrapped altogether. That’s because the policy was left out of the Finance Bill earlier this year (before parliament was adjourned in May for the election) and there has been no official update over the progress of the proposals since then.

Our assumption is that the MTD roadmap is expected to remain unchanged – which would see every individual and small business having access to their own digital tax account and, by 2019, provide quarterly digital updates about their tax to HMRC. After all, a pilot scheme is currently underway and many of the country’s top tech companies are working closely with HMRC to flesh out the plan – so altering or scrapping the plans at this late stage would be catastrophically disruptive.

But, with confusion rife among accountants and their clients over the state of MTD, the new government will need to work quickly to reaffirm its support for the plans, give a swift update about where the legislation is and when it will be included in a future Finance Bill. The sooner that accountants are able to allay their clients’ fears, cut through the confusion and provide reassurance that they will be able to guide clients through MTD, the better.

IR35 changes need a re-think

For many accountants, IR35 can be a major headache and a frequent source of client questions – and the latest round of changes have been poorly received within the profession. The latest of these last April stated that the government now requires that, in the public sector, consideration of a worker’s contract status for tax purposes falls on employers, not contractors. That means it is public sector employers that must deduct tax and national insurance contributions from private contractors’ pay at source.

This change will be potentially devastating for the huge number of UK contractors who work in the public sector (for example IT contractors who operate as a business) and I believe it needs to be re-thought.

It’s unfair of the government to position the self-employed on a non-level playing field, depending on which sector their clients work in. Self-employed people have none of the same rights or security enjoyed by employed workers, and there should be some recognition of that. Unless the new government wants to cripple the growing ranks of the self-employed, it should consider abolishing the change and replacing it with a simpler, more robust and fairer set of rules instead.

Better late than never

Late payments are a scourge for anyone running their own business and can severely hamper a freelance or micro-business client’s cashflow. But they’re also a big headache for accountants to deal with; not least because they can put a client’s entire future at risk.

Our own research suggests that only half of the invoices sent by micro-businesses each year are paid on time, with some business owners saying they have to wait months, or years, to get the money they’re owed – and sometimes even have to write off thousands of pounds from their accounts. In some extreme cases, this can push a fledgling venture out of business completely.

While it’s positive news that the government is planning to appoint a Small Business Commissioner (or “late payment tsar”) to deal with the issue, the reality is that just 2% of self-employed people believe that the new role will actually be able to make good on its promise. Most don’t even realise that the commissioner post has been created in the first place!

So, with the £130,000-a-year post in Birmingham still not filled, I believe that the new government should work more closely with freelancers and small businesses to identify what measures can really be brought to bear on late payers, before properly equipping him or her with powers to penalise the people putting small businesses’ futures at risk.

Ed Molyneux is CEO and co-founder of FreeAgent.

 

 

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

Professional Services Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine

Accounting Firms Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021

Making Tax Digital Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource