Kevin Reed discusses the week's news
The Friday Afternoon Live broadcast from 29 January isn’t here because, well, the video didn’t work properly. Sorry.
So here’s a quick roundup of the show, presented by Accountancy Age’s Kevin Reed.
Tax dominated the news. Not that it has been out the headlines much in recent times, but the last week was exceptional.
From Google’s payout to the Treasury, The EU’s latest plan to attack tax avoidance, through to the 31 countries signed up to the OECD’s tax transparency initiative. Oh, and the Treasury Select Committee looking to launch an in-depth review of the UK’s corporate tax system.
So, what can we expect from all of this? Well, for all of you expecting tens of billions of pounds extra tax in the Treasury’s coffers, you’re likely to be sorely disappointed. And even if the effective tax rate among multinationals does increase, it’s not going to be anytime soon.
Agreements made across jurisdictions are difficult enough to get down on paper. But there must be concern about how the practicalities of swapping information between countries. And, more fundamentally, many countries use tax rate variances to drive investment.
If tax is still used as a tool to ‘win’ business, then there will always be a race to the bottom – or a big fat zero on companies’ tax return.
And with extra layers being piled on, this inevitably increases the cost of doing business. How will the OECD’s project sit alongside the EU’s? Of course there will be lawyers, accountants and consultants that do well out of the ensuing chaos.
But it wasn’t all tax.
The government announced it would move audit exemption thresholds further out, in line with the maximum rates suggested by Europe.
In other words, more companies are going to be exempt from a statutory audit. ICAEW CEO Michael Izza voiced dismay at the plans.
However, some regional practitioners were sanguine to the plan. After all, we continue to see audit licences being ditched by smaller practices as their client base falls out of the net, but many smaller practices thriving.
Assurance around client accounts is still important. They need to understand their current financial position and where they are heading. Crucially, so do their lenders and anyone looking to extend credit based on their financial position.
There has to be a point, though, where raising the exemption must stop. And, with it now matching the new definition of a ‘small business’ at £10.2m turnover, many would suggest this is a good point to leave it.
Kevin Reed is head of editorial at Accountancy Age, and other Contentive brands