Tax is being modernised
There's a seismic change coming to the way everyone submits their yearly taxes. Many SMEs are likely to need more comprehensive support from their accountants in order to stay up-to-date and compliant. The MTD initiative is already forcing businesses and accountants to change how they work — so those that adapt soon will thrive in the future.
For individuals, HMRC will soon start to consolidate financial information that it already knows or has access to. No more paper self-assessments. HMRC have said that a new Self-Assessment portal — 'your personal tax account' — could track your tax liabilities in real-time. With this, accountants will be able to act in more of an advisory capacity to help people become more tax-efficient.
For businesses, HMRC have stated that VAT returns will be submitted digitally by April 2019. Most companies above the VAT threshold (£85,000) are already using software that interfaces to HMRC (e.g. Sage Business Cloud or Xero), so this change is unlikely to cause major disruption in itself. The real disruption will come from the intention to increase the frequency of tax submissions to quarterly rather than yearly.
Quarterly tax submissions will now need to be more efficient and accurate to avoid penalties.
How does this affect me?
Right now, many companies hand over to an external accountant to make various year-end adjustments. That's changing though. In the future, large year-end adjustments may be met with penalties if they overlap with earlier returns. The penalty system is still under review (as of August 2018) and is unlikely to become effective until April 2020, but companies should be aware of the step changes — in submission frequency and the need to be more accurate and timely.
Finance Directors are changing too
Finance Directors are typically employed full-time at larger organisations. Most will have the chartered qualifications and experience required to spearhead changes that improve accounting accuracy, efficiency and timeliness, making them sought after with start-ups and SMEs too.
Unfortunately, they're expensive and if you want them to take care of the basics too, FDs often bring junior accountants in tow. This can leave a void of expert financial skills and business advice from a qualified professional within the upper levels of many SMEs.
The Glassdoor UK average for Finance Directors is £121,342 as of September 2018. This makes full-time Finance Directors out of reach for many SMEs.
Solution: PAYG Finance Directors
Pay-as-you-go Finance Directors don't come with the typical obligations of a full-time employee. They often work on a remote ‘virtual’ basis, with meetings arranged over Skype, or through onsite work. Start-ups tend to like this approach but it's becoming popular with mature businesses too; everyone wants lower overheads.
We'd recommend finding a PAYG finance director from a wider company, rather than an individual. They tend to have access to a full range of services that the company may offer (e.g. bookkeeping, specialist tax advice or IT) — which may be needed to bring compliance up to HMRC's upcoming standards.