2022 was a challenging year for businesses. As we begin 2023, many are already starting to feel the impact of the cost of living crisis, and at a time where consumers are likely to start reining in their spending, the cost of running a business is at an all time high. There’s no doubt that more firms will be turning to their accountants in the coming months as a trusted adviser, and as an industry we need to be ready to support them.
Here are some examples of ways that we can support clients through what will be a difficult year ahead.
Making sense of government budget announcements
Last year will be remembered as a busy one for tax changes, with three government budget announcements in the space of nine months. The mini budget announcement, led by Liz Truss and Kwasi Kwarteng back in September, was the most memorable for causing chaos in the UK markets and making securing a mortgage for many people impossible. Many of the measures announced were quickly reversed, and these U-turns caused confusion and a lack of stability for business leaders.
Yet again following the most recent budget announcement in November there were a sweep of changes to income tax, capital gains tax, inheritance tax, windfall tax and taxes on dividend payments.
Looking ahead, the next government budget, the Spring Statement, will take place on March 15th, and as a firm we will be prepared to translate any changes that are made to our clients, and help them to navigate any impact it may have on their business.
Offering real, practical advice
It’s during hard times that our industry sees the greatest demand for real and practical advice, and we expect this to be the case next year as the UK heads into a likely recession. Each business will face different challenges, but it’s important that they all understand there are a variety of options out there that they can take advantage of.
For example, as the cost of living crisis hits, more people will be turning to their employer to help them. However, costs are also rising for employers, and they may not be able to afford to give the pay rises at a sufficient level to make a difference to the take-home pay of their employees. On this issue specifically, as a firm we have shared alternatives that employers (particularly those who are smaller businesses) can explore. For example share-based arrangements, enterprise management incentives, phantom share schemes and salary sacrifice arrangements.
Improving the society in which businesses operate
As a firm, we’ve seen first hand the opportunity that exists for accountancy firms to use their expertise to make a positive difference to the tax system as a whole.
Back in April, one of HW Fisher’s partners, Tim Walford-Fitzgerald noticed a flaw in the Homes for Ukraine scheme which meant that corporate landlords would face a tax bill, potentially in the tens of thousands of pounds, if they were to let out properties for free to refugees. As a direct result of Tim flagging this issue to the media, HMRC quickly changed the rules so that ATED charges would be waived for those taking part in the scheme.
Needless to say this would have increased the amount of housing available for those who need it, and it is an excellent example of how the conversations that we have with our clients can have a real impact on the world that we are living in today.
Helping businesses to combine profit with purpose
Finally, another area where accountants should be supporting businesses this year is through the climate transition. The renewed, international focus on COP27 this year demonstrated that there is a growing appetite for businesses to combine profit with purpose.
In order for businesses to become more sustainable, they must set clear objectives, measure accurately and then communicate their progress back to stakeholders. This is where we step in. We work with a number of clients to ensure information disclosed to stakeholders is consistent with the financial statements and the underlying strategies – helping to accurately communicate corporate values and providing transparent information.
Climate change is likely to have a profound impact on business and on us as individuals; it could lead to significant market corrections and changes in the coming years. Failure by business to respond to the risks has significant implications, such as disruption to supply chains, loss of asset values, and market dislocation. As accountants, our job here is to help pre-empt the risk and make an assessment on the potential implications through the financial statements.
Looking at the year ahead
The next twelve months will be challenging, but where there is challenge, we believe there can also be opportunity. The pandemic was a true example of the fighting spirit amongst UK businesses. In fact, in the first year of the pandemic, more than 800,000 new businesses were registered – a 22% increase compared to the previous year – and these are estimated to have added more than £20bn to the national economy. We saw traditional businesses forced to adapt their business model and start offering their services digitally, and remote working this year has now become our new normal.
We head into this year with cautious optimism, however what we are certain of is the strength of the business community. We are looking forward to helping our clients plan for the year ahead, and to be a part of creative solutions as they continue to drive new innovation across their respective sectors.
