2020 has been a year that no one planned for. Many UK businesses have seen a protracted downturn in revenue and jobs, and indications are that we’re not out of the woods just yet. While 2021 will no doubt present new and continued challenges, it will create fresh opportunities too.
Policy changes regarding IR35 in the private sector, the Making Tax Digital (MTD) updates, coupled with broader business trends such as flexible working and a strong focus on a green economic recovery, will all be important in the new year. Brexit will also be weighing heavily on business owners’ minds, and whether there is a deal or not change will be coming in January.
Now is the best time for businesses to start planning (with the guidance of their accountants, of course). Here are six key areas business owners need to prioritise over the next few months:
Brexit deadline is ticking
Crunch time is fast approaching for the UK’s departure from the European Union, and Brexit updates will be fired off in quick succession in 2021 as details get ironed out. Small businesses can still take steps now to put themselves in the best possible position – the government transition guide is a useful resource for businesses to start planning.
Getting an accountant to take care of the financial legislation means small business owners will have more time to concentrate on other legislative changes. Our Brexit hub breaks down what you need to have sorted by the 31st December deadline.
Keeping your distance
COVID-19 forced the majority of businesses to work remote, and while many will be keen to get back into the office, the flexibility that remote working offers means that it’s here to stay. At Xero, we’ve been closely following technology trends in business through our app marketplace in respect to remote working. Unsurprisingly, we’ve seen spikes in searches for tech solutions related to ecommerce, online payments, cash flow management, and inventory management.
Taking the time to invest in a tech stack that works for your business will put you in a strong position for the new year. An accountant can advise on what financial functions you can make digital, especially with the looming MTD update.
Making Tax Digital 2.0
At the moment, only VAT-registered businesses with a taxable turnover above the £85,000 VAT threshold are required to adopt Making Tax Digital. From April 2021, all VAT-registered traders, including small businesses, will have to implement compatible software to prepare themselves for their first VAT return starting on or after April 2022. The rules also require owners to keep digital records.
Our MTD for VAT software is already available to those under the VAT threshold. We’ve seen many accountants voluntarily submitting clients’ returns digitally whether above or below the threshold. The deadline might seem a way off, but moving your finances online has many benefits.
One of the buzzwords that gained the most traction during the pandemic was agility. While 2021 may not necessarily be a year of drastic pivoting, it may still mean being flexible and open to change. Agile businesses were undoubtedly able to better respond to opportunities or threats throughout 2020, and 2021 will be no different.
Being agile and innovative may mean tweaking parts of your business, such as offering delivery, setting up an online shop (if you haven’t done so already), accepting new payment methods, or setting up remote working.
In April 2021, the government will implement new IR35 reforms that will transfer responsibility from contractors to large and medium companies to assess IR35. Under the legislation, if a contractor is engaged through personal service companies (PSCs) and assessed as inside IR35, they will need to pay the same income tax and NICs as if they were employees.
The new rules will apply irrespective of what type of intermediary the company engages through. Small businesses are still exempt from these changes, but your accountant will be able to advise whether your business is exempt or not.
In line with the UK government’s 10-point green plan, businesses will need to consider their long-term impact on the environment and society. Sustainability, which will be a big focus point in 2021, includes social responsibility and how a company treats its employees and gives back to the community. Throughout the pandemic, consumers have gone out of their way to support businesses that take these aspects seriously.
Since accountants can offer strategic advice on business decisions, they’re well positioned to help businesses become more sustainable. They can determine the cost and help make a clear business case for switching to more environmentally friendly alternatives.
While 2020 has been a long stretch, there are signs of easing off in the new year. By planning now and getting your accountant involved from the beginning, you’ll be set to reap the rewards of your resilience in 2021.
Visit our dedicated site for more resources, webinars and inspirational stories to help you emerge stronger in the new year.
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