What’s ahead for British businesses in 2020
13th January 2020
British businesses faced numerous challenges throughout 2019, with Brexit dominating the headlines and causing ongoing uncertainty. But with a Conservative majority and a promise to ‘Get Brexit Done’ by the 31 January, what else lies ahead for businesses in the new decade?
Making Tax Digital: What happens next?
Against a background of numerous government U-turns, Making Tax Digital (MTD) for VAT-registered businesses took effect as planned in April 2019. It’s been a rare success story for HMRC too, with 94% of the UK’s 2.2 million VAT-registered firms complying with the first two quarterly deadlines. A light-touch approach towards issuing penalties for non-compliance remains in place until April 2020, with the Revenue preferring to nudge those reluctant business owners to join the digital revolution instead.
Given its success, MTD for other businesses seems likely to be the next extension of the Government’s digital regime – just when is anyone’s guess. Ministers pulled the plug on fully rolling out MTD for individuals in May 2018, although it remains in the pipeline. When it does arrive, it’s likely to include a simpler assessment and real-time tax code changes.
It should also spell the end for taxpayers having to file self-assessment as we know it, possibly from 2022/23 but probably no earlier.
Before then, as part of the MTD scheme, the Revenue could merge personal tax accounts with business tax accounts. In October 2019, the Office for Tax Simplification (OTS) called on HMRC to implement an individual tax account to enable all taxpayers to see information about different types of income in one place. If HMRC agrees, it could soon be the case that individuals see self-employment and rental income in new tiles alongside other tiles for employment income, savings income and national insurance.
HMRC to maintain compliance crackdown
Tax inspectors have had their knives sharpened for a while, especially for the largest businesses, after HMRC admitted it is actively probing around half of the UK’s largest firms at any one time. Since 2010, the Revenue has secured £185 billion in extra tax through investigation and prosecution. It is successful in more than 90% of criminal cases it brings to trial, and in 2018 secured more than 830 criminal convictions for tax and duty fraud – more than 80% of those charged.
Whether or not that crackdown applies to the private sector through the extension of the off-payroll rules remains to be seen, especially with industry bodies demanding a 12-month delay after the 2019 budget was cancelled. The Association of Taxation Technicians believe that bringing in these rules from April 2020 “would lead to more errors and risks repeating errors in the public sector [in 2017]”. As it stands, medium and large-sized organisations that use private-sector contractors will determine whether an engagement falls within the rules from April 2020. Smaller private-sector firms will be unaffected.
Then there is reverse charge VAT for construction services, which has been postponed once already and is due to kick in this autumn, changing the way some construction industry contractors must account for VAT.
The changing nature of the workforce in the UK
The workplace is evolving much faster than ever before, thanks to a combination of technology and a demand for flexible working options. While employers have a job on their hands to help staff adjust to technological advances, rather than view them as a threat, they also have to embrace flexible working. Since April 2014, every worker in the UK has had a statutory right to ask their employer for flexible working as long as they’ve given six months’ service to that employer.
Most employers (99%) told the Confederation of British Industry last year that offering flexible working is vitally important to remain competitive and encourage investment. However, the number of people working flexibly has stalled over the last decade and most vacancies (89% according to a recent study by Timewise/Gartner) are not being advertised as flexible.
With generous final-salary pensions largely a thing of the past, and the state pension age set to rise to 68 between 2044 and 2046, millennial workers face the prospect of working for considerably longer than previous generations. Providing flexible or remote working, opportunities to work from home once a week or to duck out to fulfil personal commitments, such as providing care for a child or an elderly relative, are likely to have significant appeal for this group going forward.
Running a sustainable business
With international climate protests hitting the headlines, and growing demand for green energy, sustainable finance, second-hand products and vegan food, environmental issues are becoming increasingly difficult to ignore. Research from Nielsen in 2018 found that 81% of people around the world felt it was “extremely or very important” for companies to do their bit to improve the environment. Further research published in the Telegraph claimed 62% of medium-sized businesses in the UK had invested in energy-efficient new technologies.
In recent years British businesses have created roads that combine asphalt with waste plastic, smart flooring which converts footsteps to energy, and protein-packed snacks made from crickets. That trend is likely to have a continued effect on businesses in the next year, as more consumers look for sustainable products and services. It’s also likely that the next Budget, which is due to take place on Wednesday 11 March, will include some environmental policy announcements, either in the form of funding for sustainable businesses or as tax penalties for environmentally-unfriendly practices.
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