If you run operations across multiple jurisdictions you may need to invest in the support of an experienced tech companies that can help you connect the dots.

Steven Smith, Europe Proposition Lead, Corporates, at Thomson Reuters, looks at the challenges that businesses face in being tax compliant across indirect tax, corporate tax returns and year-end accounts across multiple jurisdictions. 

Governments around the world are rapidly moving away from the established ‘old’ standard of gathering taxpayers’ information. These changes are not uniform and vary from country to country, with, for example, Spain requesting invoice details every four days, Hungary demanding them at the point of invoicing, and Italy adopting a clearance model (with Greece following suit in 2020).

Fraud and tax avoidance are the driving forces behind governments refining tax processes. By adding transparency to the invoicing process, tax authorities can quickly identify where one party or another may be cheating the system. In countries, such as India, goods and services taxes (GST) have been introduced, which enable authorities to see both sides of a transaction. China has also introduced a very similar process. It really boils down to compliance and data. If a multinational organisation is striving to comply across different jurisdictions, it must be sure that its data is correct, even before an invoice is raised. Are the buyer details correct? Does the invoice meet the criteria to calculate the correct VAT liability? All of this data needs to be present before the finance department starts raising invoices.

Tax avoidance in the UK is not on the same scale when compared to countries like Brazil and Poland. Indeed, HMRC believes that UK corporate taxpayers are far more compliant and as a result it is very unlikely to introduce intrusive reporting such as Security Industry Association (SIA), however, there is still a gap that needs to be filled so initiatives such as Making Tax Digital (MTD) are only the start of more detailed information requests.

But meeting MTD in the UK is just one thing. It’s a very different story for multinationals. Many are firefighting and taking a ‘sticking plaster’ approach to help meet the myriad of tax requirements across different territories. They tend to focus on one particular country at a time, and that focus is driven by audits. And then once that requirement has been met, they simply switch their ‘firefighting’ mode to the next country and wherever the greater risk for non-compliance rests. However, they’re missing a huge opportunity by taking this case-by-case approach rather than looking at the entire organisation’s global footprint.

Meeting MTD in the UK is just one thing. It’s a very different story for multinationals. Many are firefighting and taking a ‘sticking plaster’ approach to help meet the myriad of tax requirements across different territories.

The sticking plaster approach of hopping from one country audit to the next has left a huge mess and many organisations are now in the position where they could be much smarter in the way they store and utilise their tax data. Organisations need to review how much business they’re doing country by country and prioritise by compliance risks. Now is the time to clean up and identify and rectify problem areas before the authorities come calling.

No company is the same and so it is difficult for businesses to know which country to concentrate their efforts on at a particular time. What they can do though is connect the tax dots. By working with a technology partner that operates across multiple jurisdictions and by prioritising countries, organisations can work to meet immediate requirements and add other countries as they come onboard. Working with one partner to meet these requirements means there’s no need to repeatedly hire new people, partners or add different processes as all the tools are available in one place.

Connecting the dots isn’t just about working more effectively across multiple countries though. It’s also about how invoices and indirect tax relates to the company’s corporate tax position, about corporate pricing arrangements and corporate income tax. And it’s about connecting all that internal information and driving greater collaboration across the tax and finance departments so that all parties have a clearer view of the organisation’s financial position.

MTD is just a tiny piece of the indirect tax puzzle, yet keeping records digitally will not only help to ensure a business is compliant but will also provide far greater insight into operations. Global businesses will always have more important, more urgent things to focus on, but they’d be mistaken to ignore the opportunity digital tax has to offer the business, as well as the tax authorities.

This initiative is called Making Tax Digital (MTD) and is part of the UK’s plan for a more digital future, but not all businesses are ready. If you’re one of them, here Damon Anderson, Director of Partner at Xero explains what you can do to avoid huge fines.

1. Check your eligibility

If your business makes more than £85k each year in taxable turnover, Making Tax Digital for VAT will apply to you from April 1. After this date you won’t be able to complete a paper-based VAT return, or complete your VAT return online at the HMRC VAT portal.

If you suspect your business will soon fall within the VAT threshold, keep records digitally using HMRC-compatible software to stay within the rules.

2. Act now

If you’re eligible, first you need to find an HMRC-approved software vendor. Xero has bridging software to make it even easier to make the switch and it’s MTD tools are now live, are free for Xero users and allow you to:

• Know when VAT returns are due
• Keep a history of the VAT returns that have been filed
• Calculate how much VAT is due
• Identify the method of payment
• Post VAT returns in real time

MTD for VAT will change to the way businesses file their tax, so there’s no escape. If you’re not sure where to turn, speak to an accountant who can advise you. To help small businesses and their advisers to comply, we’ve also created Dexter the digital tax adviser who is putting a friendly face to the legislation.

Keep in mind that some VAT-registered businesses have a deferred start date of October 2019. You can find more information on eligibility here.

3. Know your penalties

HMRC can charge a maximum penalty of £500 for failure to keep the required VAT records. But don’t panic: HMRC understands Making Tax Digital is a big step, and while penalties will apply to record keeping requirements, it is expected to be sympathetic where the trader has made reasonable efforts to comply.

There’s no doubt that businesses are dealing with a lot at the moment and HMRC has said they will not pursue record-keeping penalties when businesses are doing their best to comply with the law. However, eligible businesses should still make the effort to comply by 1st April.

4. Embrace it

Millions of businesses already do so much of their business online, from banking, paying bills to interacting with their customers or suppliers, and many already using accounting software and are seeing the huge benefits. By moving to digital tax, many of the existing paper-based processes will be put to bed, allowing businesses and their agents to devote more time and attention to growing and nurturing their business.

Making Tax Digital will make tax filing simpler and more accurate. The sooner you get used to digital tax filing the more time you’ll have to grow your business.

Yet they have a relatively low-interest rate and many other saving options are now also tax-free.  So the question is – are Premium Bonds worth it?

What are Premium Bonds?

NSANDI Premium Bonds are a type of savings account that you can add money and take it out any time you want.  Interest is paid and there’s a monthly prize draw.  Bonds can be bought in £1s and everyone has the same chance of winning so the more you buy, the greater your chance is of seeing a prize.

There is a minimum of £25 for a one-off purchase and monthly standing orders and you can’t have more than £50,000.  You have to be aged 16 to buy them or they need to be held in the name of a parent or guardian until you are.

The monthly prizes are one of the big draws to Premium Bonds.  There are two monthly winners of £1 million, 5 of £100,000 and 11 of £50,000 as well as smaller prizes going down to £25.  You have a one in 24,500 chance of winning £25 so don’t get too excited about the idea of winning loads!

Tax-free savings

One of the big benefits of Premium Bonds used to be the fact that the interest paid on them is tax-free.  However, this shine has been taken off somewhat since the launch in 2016 of the personal savings allowance (PSA) which allows you to have all savings tax free up to £1000 interest a year for basic taxpayers and £500 a year for higher rate taxpayers.

This means that 95% of people can now have savings that have tax free interest so this advantage to Premium Bonds is no longer relevant.

The prize rate isn’t great

There’s definitely something attractive about the potential for winning a million pounds for your savings but in reality, the prize rate isn’t great.  If you ring NSANDI (and you can find the NSANDI phone numbers are listed here) they will tell you that the prize rate is 1.4%.

In reality, for every 25 people with £100 in bonds, 24 of them will not win a prize.  For people with £1000 in bonds, 3 out of 5 will not win a prize while if you have £15,000 in bonds, 1 in 1552 will not win a prize.

All savings are protected

NSANDI might sound like a bank or building society but they are actually a government department – the government owns the Premium Bond system.  Now that does mean they are 100% safe and there’s no chance the company goes broke and the owner runs off with the money.  However, it is worth mentioning that all savings are protected anyway under the savings safety rules so as long as you use a UK-regulated savings product, you are protected up to £85,000 per person – and the maximum for Premium Bonds is £50,000 anyway.

Prize rate versus savings rate

If you consider that prize rate of 1.4%, this is the figure to compare against other savings products to see what is the best option.  And while it compares well with some, there are definitely other savings products out there that provide a higher rate of interest on your savings.  Some general examples include:

• Top easy access normal savings accounts – 1.5%
• Top easy access cash ISA – 1.45%
• Top two year fixed savings – 2.31%
• Top two year fixed cash ISA – 1.9%
• Some current accounts – 3% on balances up to £3000

So if you have money that you don’t need to access for a couple of years, you can definitely get a higher rate of interest.  Premium Bonds compare with standard savings products so there it is more a personal choice matter.

You can resave your winnings

If you don’t already have £50,000 in Premium Bonds and you do win some money, you can also choose to resave this.  In other words, you can turn the winnings into more Premium Bonds and increase your odds a bit that you win more and bigger prizes.  This is a bit like leaving the interest from your savings in the account to continue to grow your pot.

Are they worth it?

There’s nothing wrong with Premium Bonds as a way of saving.  While the chance of winning a substantial prize is higher than the chance of winning big on the National Lottery, there is always a chance.  And smaller prizes can accumulate to build your pot and increase your odds.  So really, if you like the idea of potentially winning more money, then Premium Bonds can be a good option – just be aware of the odds and don’t expect that millionaire pay-out any time soon!

While there are some risks associated with e-filing, there are benefits as well when completed correctly. E-filing can save you time, money, and reduce the number of errors that used to accompany traditional paper filing methods. You may even be able to get your refund sooner. The risks associated with e-filing are easily avoidable and should be carefully considered this tax season. Here are 5 tips for e-filing your taxes safely.

1. It’s important to know that tax scams and fraud can affect anyone! Every year people are shocked to find that their taxes have already been filed by someone else under their name in order to receive their tax return. Be aware of phishing emails that claim to be sent from an IRS representative or a tax service informing you that your account has been locked and needs your login information. These emails usually carry a malicious download or dangerous link that infects your computer with malware or spyware. The most important thing to know is that the IRS will never contact you via email. They will also never show up unannounced at your doorstep. If a real claim is being filed against you, you will receive a warning letter in the mail first. If you happen to receive an email from a tax service that appears to be fraudulent, it is wise to call and confirm their inquiry.
2. Having trusted antivirus software installed on all your devices will give you the best protection while filing your taxes. It will ensure that no dangerous spyware is able to record your information during the process. Sometimes, scammers will obtain various pieces of information that they need from different devices of yours. Because of this, it is smart to protect all of them with the appropriate software.
3. Make sure you are using a secured wireless network when accessing important information of any kind. Opening any tax-related information on an unsecured network, like those found in public places, may be putting your information at risk of being compromised. Make sure you are only divulging personal information to encrypted sites. These sites will display “https” in the URL, not just “http”. If a financial transaction is being made on the site, there will also be a padlock icon at the beginning of the URL that will verify it is protected. Both of these are symbols that guarantee the site will be securing your information from any third party looking to intercept it. You should also verify the spelling of the website. For example, a popular tax service is TurboTax.com, whereas a hacker may set up a site seemingly similar but the URL will be TurboTaxx.com. You may be surprised that this simple switch could be enough to trick an unsuspecting tax filer.
4. A common mistake made by many is ignoring software updates as they pop up. It’s important to stay up to date with the latest version of your operating system and applications. This keeps you best protected from potential threats as many updates are made after a security breach has been detected. Also, periodically updating your login credentials is a great way to keep scammers away. This is just as important as making sure that your passwords are different from account to account at the initial stages of creating the account. You want to make sure that they are strong, including letters, numbers and special characters.
5. After filing your taxes on a specific device, back up all tax-related documents to an external hard drive and delete the information from this device. This will act as another added layer of protection in case that device should become compromised in the future. This is always a good practice for all of your internet-connected devices that carry important information.

These are some of the ways you can help steer clear of identity theft through tax fraud prevention. Unfortunately, identity theft isn’t always avoidable, but identity theft protection can help you recover from damages. Tax fraud can drastically affect the financial wellbeing that you have worked so hard to preserve. For those interested in building upon their financial health, it’s important to note that this can go beyond just your credit score and investments. It may be time to consider investing in your cybersecurity this tax season.

Forecasting your balance sheet can become a troublesome task accordingly, but here to help Finance Monthly readers is Ed Gromann, CPO at Centage Corporation, with some top tips.

Within all this uncertainty, businesses that want a steady path to growth are forced to ebb and flow with the changing nature of the world. This can feel like an insurmountable task, especially for a CFO that relies on consistency to meet the board’s expectations. As CFO, you can hardly throw up your hands and exclaim, “what is to be done?” All eyes are on you to even out the peaks and valleys as much as possible so that the organization may continue to operate without too much distress.

One way to detect the kid of crises that can upend the best-laid business plan is by forecasting the balance sheet on a regular basis. I realize that many CFOs don’t undertake this exercise because (let’s be honest) it’s not an easy task. This is a mistake. Forecasting the balance sheet can reveal critical details you’d easily miss in your P&L forecasts. Case in point: let’s say your VP of sales decides to offer a “buy now pay later” deal to stimulate sales -- a great way to build the sales pipeline. The company will certainly face all the upfront costs of registering and servicing new customers upfront, but without immediate revenue to defray those expenses. This sales tactic could lead to a cash flow issue later on in the quarter if not properly planned for.

Tips for Accurately Forecasting your Balance Sheet

As I mentioned, forecasting the balance sheet can be a bit of a bear, but these five tasks can make the task more approachable:

1. Continuously monitor your deferred revenue

Look at your deferred revenue on a monthly basis to ensure it’s not getting too high, which can lead to cash flow issues later on. If you see that it’s getting high, take steps to correct it. For instance, you may need to restrict deferred payment terms offered by your sales team, or rollout a pre-paid product or service that will generate cash upfront. The sooner you spot a potential issue, the better you can plan for it.

2. Monitor your accounts receivables

Monitor your accounts receivable to assess whether or not you have some wiggle room. For example, you may incur some expenses in January that may not come due until later in the year. Monitoring them monthly will help you assess how much cash you actually have to get you through lean times. If you see an issue early enough, you may be able to renegotiate terms with vendors.

3. Create multiple scenarios for your income statement forecast

CEOs often ask, “what happens if?” and as CFO, you want to have answers. The best way to do that is to create multiple scenarios for your income statement forecast, specifically sales projections that meet, fail short of, or exceed the sales projections for 2019. Not only will this increase the accuracy of your balance sheet, but it will help the organization create and implement timely contingency plans.

4. Don’t forecast too far ahead

Although I’m a firm believer in projecting what might occur, it’s important that you don’t forecast too far ahead. Although economic indicators are still strong, the stock market has dipped and we continue to live with the potential of trade wars, and so on. It’s wise to limit your balance sheet forecast for the next month or two ahead, as each new month will bring new changes that can affect the accuracy of your forecasts.

5. Do sensitivity analysis on your actuals

Sensitivity analysis is the quickest and easiest way to predict how change will affect your financial statements (I say quick and easy because it tests just one variable at a time, meaning you don’t need to change your underlying model). For instance, experiment with sales and expenses within your P&L to see how they flow through to the balance sheet. This exercise will help the management team make better and more accurate decisions.

No doubt as a CFO you’re pulled into many directions, and the last thing you want to take on is additional tasks. That said, forecasting your balance sheet is one of those tasks that will save you a lot trouble.

For many, it can seem like a daunting task, so is there anything you can do to make the process easier? Here James Foster, Commercial Manager at specialist accountancy provider Nixon Williams, provides some top tips on completing the process.

The majority of the working population have their tax deducted at source from the company that they work for, however, anyone that is self-employed has to complete a self-assessment tax return in order to be taxed appropriately on their earnings by Her Majesty’s Revenue and Customs (HMRC).

When you start working for yourself, your workload includes everything that you might need to do to make your business a success – from marketing and advertising to admin and ordering stationery. You may find that managing your finances is more complex than you might have expected as you will need to keep records of all the money you spend in the running of your business, as well as how much you earn. Many people decide to use the services of a professional accountancy firm like ours to help them through the process, but some decide to manage everything themselves. Either way, there are some simple things you can do to make the process as straightforward as possible, so here are my top five tips:

• Get organised – compiling all your invoices and receipts ahead of time is the best way to alleviate last minute stress when it comes to self-assessment forms. Ideally, you’ll have kept some form of spreadsheet or an online portal up to date throughout the year of your accounts, and you can use that to finalise your tax return. But if that’s not the case, don’t wait until the very end of January to get started. There are often missing pieces of information you’ll need to track down, so give yourself plenty of time to work through everything. And don’t forget – if it’s your first time completing your Self-Assessment Tax Return, make sure you’re registered with HMRC in time.
• Know the key dates for completion – If you decide to complete your tax return online then the deadline for this is any point up until the 31^st January, whereas a paper tax return needs to arrive with HMRC by the 31^st October the previous year. If you haven’t sent an online tax return before then you will need to register and HMRC advises you to do this no less than 20 working days before the deadline.
• Separate your work and personal bank account – a number of self-employed people operate with just one bank account for personal and business use, but this can make it hard to separate out your business expenses from your personal expenses. It’s often easier to identify which costs are related to your business by having a separate business bank account. This will not only help you keep a track of your business expenditure throughout the year, but it will make your life a lot easier when it comes to your tax return.
• Know the expenses and tax reliefs that you can claim – if you are a sole trader, for example, make sure that you know the expenses that you can claim in your tax return, as there may be some items you might forget about such as business mileage and expenses relating to working from home. It’s also beneficial to know about other tax reliefs that you are entitled to such as personal pension and gift aid payments.
• Tax returns can be complex so use an accountant – having professional support can be really beneficial because an accountant should not only assist with the compliance side of things (i.e. helping you to file your tax return on time) but they will also give you pro-active advice where appropriate. Tax returns are something most accountancy practices deal with on a daily basis from April to January, alleviating a lot of the financial stress away from clients and helping them to focus on what they do best – making a success of their business.

Running your own business and managing the many tasks that come with it can often push your tax return submission to the bottom of your ever-growing pile of work to do – but help is always available from professionals with the right experience and knowledge of the latest legislation.

Below Finance Monthly hears from Jeannie Boyle, Director & Chartered Financial Planner at EQ Investors, who provides 5 top financial planning tips to help you on the right path to a financially sound 2019.

1. Set goals for the life you actually want

Work out what you want from life and make your money work towards that, rather than vice versa. Your priorities will naturally change over time, so taking the time to differentiate your short, medium and long term goals will help keep you focused and on track through the inevitable bumps in the road.

2. Make the most of your tax-free allowances

With tax allowances, it’s a case of use them or lose them. Ensure you and your partner are using all available allowances; personal, savings and dividends. If you haven’t taken advantage of this year’s Isa, junior Isa, lifetime Isa or annual pension allowance, the 5 April is your last opportunity to do so in the 2018-19 tax year.

3. Get pension savvy

An increasing number of individuals will be affected by taper annual allowance as carry forward is used. For those with taxable incomes of over £100,000 per ann

m, it’s worth having a review to check employer and employee contributions remain appropriate. From April, the pensions ‘automatic enrolment’ regime will see the minimum amount paid in rise from 5% to 8%.

The Lifetime Allowance increases with CPI inflation from £1,030,000 to £1,055,000. Also make sure that your expressions of wish for pensions are regularly updated.

4. Build a picture of your current and future finances

Financial planning is all about anticipating the consequences of different choices and situations. By looking at your income, outgoings, savings and other assets, you can crunch the numbers to create a long-term projection of your finances. Identifying trends (positive or negative) can help to give you the best chance of achieving your goals and have a huge impact on how in control of your finances you are.

We’ve designed our free online health check to help you measure your financial fitness, and to see what your finances might look like in the future.

5. Peace of mind

One person in the UK develops dementia every three minutes, so stay in control and plan ahead by setting up a Lasting Power of Attorney (LPA) and allow powers for discretionary management. Every adult with assets should look at getting an LPA, otherwise your loved ones will need to apply through court. And don’t keep putting off getting or updating a will.

Below, Finance Monthly hears from Kim Hau, Senior Proposition Manager for ONESOURCE Indirect Tax, Thomson Reuters, on preparing your business for MTD.

HMRC’s move is in-line with the global trend towards a more digital relationship between tax authorities and businesses, as well as increased regulatory guidance from the Organisation for Economic Co-operation and Development (OECD) for greater transparency in tax data.

Digital Records and Submission

The first stage of MTD for VAT mandates digital record keeping and filing for all VAT registered businesses with a turnover of £85,000 or more, providing a “soft landing” period for businesses before mandating the requirement to have digital links between their data. The ultimate aim is to improve the quality of record keeping, while reducing the mistakes often caused by manual processes and reducing the perceived tax gap – of which £12.6 billion relates to VAT.

A recent Thomson Reuters survey on MTD found that 79% of respondents keyed in submissions directly into the government gateway, something that will not be acceptable come April 2019, or, October 2019 for more complex businesses.

Instead, businesses will have to store and maintain all Accounts Payable and Accounts Receivable data in electronic form using functional compatible software. In other words, using technology that can store and maintain records, perform the required calculations, and submit the information to HMRC directly via their Application Program Interface (API). Those wedded to the use of spreadsheets will find that whilst they can continue to be used, they will require additional software to handle the digital submission piece and certain conditions must be met to ensure a digital trail.

Digital Links

The second stage mandates digital links, the requirement that any transfer or exchange of information in the VAT return process is made electronically between software programs, products or applications. This is a move to limit mistakes from manually inputting figures and comes into effect for all VAT registered businesses in April 2020.

The second stage mandates digital links, the requirement that any transfer or exchange of information in the VAT return process is made electronically between software programs, products or applications.

By far, this is anticipated to be the most complex and difficult requirement of MTD for VAT, forcing businesses to assess every single step of the UK VAT return process for each of their entities.

While there will be some flexibility in the first year of MTD going live there will be no bending of the rules. Connecting all digital records will not only help to ensure the business is compliant but will also future proof organisational systems and processes before penalties are enforced.

The Road to Digital Transformation

An obvious first step is for businesses to understand to what extent they are already compliant, focusing on where relevant data is collated, what kind of data is available via digital means and understanding the processes used for producing VAT returns.

At this stage, companies will be able to decide on what level of change is required. However, with further reforms expected after 2020 it is highly recommended that companies do not settle for a “sticking plaster” solution.

With further reforms expected after 2020 it is highly recommended that companies do not settle for a “sticking plaster” solution.

There are many solutions available to meet each gap of MTD for VAT compliance, however piecemeal solutions should be put in context of the general trend towards a digital tax agenda, and their long-term suitability.

Reviewing the options with internal and external stakeholders such as IT, software providers and external consultants will ensure that the most appropriate solution to meet operational needs is selected. This could include considering data security policies, compatibility with existing systems (e.g. ERP) and developing a tax technology strategy. After all, while MTD for VAT is a UK initiative, it is also worth considering the growing impact on tax teams of similar reporting requirements in other jurisdictions.

With the enforcement of IFRS 16 ahead of us, as of January 2019, Nick Turner, Country Manager UK & Ireland at Anaplan, discusses with Finance Monthly the potential opportunities therein.

There’s nothing quite like ringing in the new year. Along with the promises of fresh starts and renewed perspectives, it’s that time of the year that we can set—and dare not forget—lofty goals to achieve in the 365-days ahead.

Effective 1st January 2019, IFRS 16 marks one of the first significant changes to lease accounting standards in 40 years.

The new year represents more than an annual reset button and it ushers in more than new beginnings. It also brings deadlines. This rings especially true for corporate finance teams this year, as the IFRS 16 deadline looms.

Effective 1st January 2019, IFRS 16 marks one of the first significant changes to lease accounting standards in 40 years. If they haven’t already made the adjustments, businesses now have a very limited time to ensure that future accounting processes will meet compliance.

Unfortunately, for companies addressing these changes through spreadsheets and aging technology, time might be ticking even faster because these manual tools can turn such operations into a lengthy, burdensome, and complex undertaking.

What IFRS 16 means for businesses

Beginning on the first day of the year, new standard IFRS 16 will be implemented by the Financial Accounting Standards Board (FASB) and the International Accounting Standard Board (IASB). This standard will impact company balance sheets and how many businesses that rent or lease will operate in the future.

The changes are designed to make it easier for outsiders to compare the performance of different companies.

The new IFRS 16 requirements will eliminate nearly all off-balance-sheet accounting for lessees. Further, it will impact commonly used metrics such as EBITDA and gearing ratios. Why? The changes are designed to make it easier for outsiders to compare the performance of different companies.

Although the changes in performance metrics will make it easier to compare and contrast, they may also affect credit ratings, borrowing costs, and even stakeholders’ perception of a company. This makes it vital that companies understand and prepare for the effects of this new leasing standard.

Technology that turns arduous into effortless

Even though time is winding down on the IFRS 16 deadline, businesses still have an opportunity to implement a solution that can quickly fulfill its requirements—and many are turning to cloud-based, Connected Planning solutions.

Adhering to the new standard with spreadsheets and legacy tools quickly turns burdensome; in contrast, Connected Planning technology supports rapid implementation, easily interfaces with existing enterprise resource planning (ERP) databases, and calculates large volumes of data in real time. Connected Planning gives decision makers instant insight into how to optimise their company’s lease management strategy in context of the new regulations.

The deadline for IFRS 16 approaches and businesses have to determine the best way to comply with the new leasing standard soon. Connected Planning technology offers a way to tackle the complexity of the standard with ease.

Following the autumn budget announcement yetrerday, Finance Monthly has heard the initial reactions from experts at top accountancy firm Crowe UK. From Corporate Finance to Small Businesses and IR35, there are tax implications for many…

Matteo Timpani, Corporate Finance partner:

Entrepreneur’s Relief (ER) remains an attractive, and essential, tax incentive that drives UK innovation and entrepreneurship. That said, it is disappointing to see amendments made to the relief which may impact the ability of certain individuals to benefit from it in the short term. There will be a number of mergers and acquisitions (M&A) transactions currently in progress which will likely be put on hold to ensure participants are able to qualify for Entrepreneur’s Relief in due course.

This change only emphasises the importance of business owners taking specialist advice, and being prepared, long in advance of the time they are considering succession and exiting their business. We await the specific details of when this change will be implemented but anyone who is considering selling their business in the next 12 months, and is unsure if they, their management team and/or other shareholders will qualify for ER, should seek advice now and consider immediately the implications of this change.

Tom Elliott, Head of Private Clients:

It is not surprising to see The Chancellor reaffirm the government's commitment to Entrepreneurs' Relief, albeit with tighter conditions (qualifying period doubled to two years). However, it might have been more effective if the minimum shareholding requirement was abolished altogether – this would incentivise all employee shareholders and not just the C-suite.

The changes to Capital Gains Tax (CGT) reliefs for the sale of main residences look like an attempt at modernisation. Lettings relief has changed so as not to apply to the AirBnB model - relief applies only for shared occupation. The shortening of the ‘period of absence’ from 18 to nine months for Principal Private Residence relief will need to be monitored closely, as any slowdown in the housing market (where it may take more than nine months to sell) may result in an overall reversal.

Rebecca Durrant, Private Clients partner:

It was pleasing to see the personal allowance and higher rate tax brackets raised a year early, but it will be interesting to see whether the Chancellor treats this as a ceiling. Rates could now be frozen for following years, which would turn the tax cut into a hike very quickly. In the mid to long-term, this may not protect the inflationary impact that a no deal Brexit may have.

Phil Smithyes, Managing Director, Crowe Financial Planning

The move to raise the personal tax allowance to £12,500 and raise the higher rate tax threshold to £50,000 from 6 April next year is a move that should be welcomed by most pensioners, making their pension savings go that much further.

Under the pensions ‘freedom and flexibility’ rules, individuals could take up to £16,666 each tax year from their pension fund before they begin paying income tax. This is achieved through a combination of 25% tax-free cash (£4,166) and the new £12,500 personal tax allowance. Careful planning will help pensioners money go that further and minimise their liabilities to tax in retirement.

Susan Ball, Head of Employers Advisory Services:

In April 2017, the government reformed the IR35 rules for engagements in the public sector and early indications are that this has resulted in an increase in compliance within the public sector. This will now be replicated for the private sector, but a reasonable implementation period is vital so the effective date of 2020, and the fact the rules will only be extended to large and medium sized private businesses, are both sensible steps. The Chancellor clearly took on board the feedback from the consultation process over the summer. Engagers should start planning now based on the experience of the public sector in order to have an effective procedure in place for the start date of April 2020.

Laurence Field, Corporate Tax partner:

The Chancellor's statement was made against a background of political uncertainty, mixed economic signals and an increasingly protectionist agenda from many of our trading partners. Tax is one of the most politically high profile things a government can do, and this was one of the most political budgets a Chancellor has had to deliver for decades.

The UK doesn't raise enough tax to keep providing public services at the current level, especially given the aging demographic. A tax system that raises more tax will need to be more efficient, perceived to be more fair and find new 'pockets' of wealth or bad behaviour that can be taxed without political risk.

An autumn budget also has the advantage of kicking the can down the road given that the majority of changes will only kick in from April next year if not later. However, this is the first glimpse we have of the type of post Brexit fiscal landscape the government wants to create.

The announcement of a potential digital services tax (DST) makes sense. Global companies need to be seen to be paying their 'fair share'. They don't have votes, so are an easy target. Playing tough with the digital services tax is politically attractive even if this causes conflicts with other tax jurisdictions. It is unlikely such measures will find much opposition in Parliament given the ground has been well prepared. How our trading partners (and particularly the US) react will be the real challenge. Retaliatory measures will not help the British economy. Therefore by outlining a timetable to introduce measures in 2020 he has provided cover for trying to get international agreement. Talking tough, but deferring action makes other parts of the Budget more palatable.

Elsewhere, plastics have found themselves in the environmental firing line and it was an easy, and politically popular decision, to try and find ways of taxing its use. Requiring more usage of recycled plastics is a way of stimulating that industry while being seen to be tough on pollution. The challenge with all sin taxes is that if they are too effective, the source of revenue will dry up. The damage that plastics can do is all too obvious, the Chancellor is no doubt sincere in his desire to reduce our use, but would no doubt be grateful if industry doesn't take action too quickly.

Following the Chancellor’s promise this month to ensure giant technology companies pay a fairer portion of tax, Chris Denning, tax partner at MHA MacIntyre Hudson, argues low tax rates for multinationals are a key fiscal tool to encourage investment into the UK. We’ll have to see how this pans out in the autumn budget next week.

Philip Hammond may have impressed the Tory conference by threatening to “go it alone” with a digital sales tax but in practice there will be a strong reluctance to take unilateral action as it could damage the UK’s economic and fiscal competitiveness. HM Treasury clearly stated in its updated position paper of March 2018 that the preferred solution for the UK needs to sit within the international corporate tax framework.

The constant negative focus on the level of corporation tax multinationals pay in the UK fails to account for the fact that the UK’s low rate is a hook for multinationals to locate here, and means they employ thousands of people as a result. The full benefits to the UK economy don’t show up in corporation tax statistics, and people must remember they don’t reflect the full story.

Amazon’s 2017 results for example prompted much furore, but indicated that the company paid more tax to the UK exchequer than in the previous year. Headcount went up significantly, resulting in a significant increase in pay-as-you-earn tax (PAYE) and national insurance contributions (NIC).While companies have a “moral obligation” to pay the right amount of tax they are also still obliged to create shareholder value which directly benefits thousands of individuals whose pension funds will be heavily invested in these stocks.

The Chancellor also needs to consider what defines the “digital economy” as opposed to the “digitalisation of the economy”, which impacts every business. The UK Government sees business models that profit from user participation, such as social networks, search engines and intermediation platforms as the targets for reform and not online content providers, e-tailers or software/cloud service providers. This is on the basis that remote selling cross border is not unique to “digital businesses”. This is a significant departure from the EU’s proposed Directive where remote content sellers and service providers are targeted. Going it alone is only likely to muddy the waters further.

This week Finance Monthly hears from Nick Williams, Head of Business Development at UK Accountants, Intuit, who discusses change management methodologies and outlines an 8-step process for accountancy firms to apply Dr John P. Kotter of Harvard Business School’s methodology to ensure a smooth transition to Making Tax Digital.

These are changing times in the UK's accounting industry. Making Tax Digital (MTD) is the biggest overhaul to the taxation system in decades, and firms are not only adopting new ways of working, but they are completely re-thinking business models to meet the evolving needs of their small business clients.

The shift to digital accounting introduces new opportunities for accountants to take on more of a financial advisory role, providing real-time insights and strategic guidance to grow their clients’ businesses. However, while the shift to digital accounting is part of a wider push to digital in nearly all aspects of both our business and personal lives, the enormity of it cannot be underestimated. To ensure a smooth transition for their practice and their clients, accountants would do well to approach it in the same way as any other change management programme.

One of the most well-known change management methodologies is by Dr John P. Kotter of Harvard Business School, who observed countless leaders and businesses as they were trying to transform and execute their strategies, and developed the 8-Step Process for leading change. Here’s how accountancy firms can apply the same methodology to ensure a smooth transition:

1. Establish a Sense of Urgency: For months – years perhaps – we’ve been saying “it’s not too late to be early” to prepare for MTD. Communicate the message internally and externally that now it is in fact is a bit too late to be early. It really is time to move forward with cloud-based accounting to avoid a last-minute panic when deadlines approach.
2. Create the Guiding Coalition: Having dedicated “experts” flying the flag for digital accounting will help to ensure broader education among all employees on the forthcoming regulations. Start a process to train fee earners on your preferred cloud software and have "champions" trained as soon as possible.
3. Develop a Vision and Strategy: Think about how you can use MTD to seize new market segments or opportunities. For example, there are an estimated 1.75 million landlords in the UK, and all those earning more than £10,000 from property income will be liable for Making Tax Digital. For some, recording transactions online will be a first, and they will likely seek counsel from dedicated experts. Be one step ahead by positioning yourself as a future-ready firm.
4. Communicate the Change Vision: Once employees are up to speed on the changes, running a Making Tax Digital marketing campaign with clients is critical. Telephone calls, emails, client letters and even social media marketing will help to communicate these changes, and position your practice as a firm that is there for its clients every step of the way.
5. Empower Employees for Broad-Based Action: Some firms and their clients will be new to digital accounting; however, employees should be given freedom to experiment with different ways of working. Periods of change are frequently followed by periods of innovation, so try not to hamper any enthusiasm as employees “test and learn” to drive better outcomes for their clients.
6. Generate Short-Term Wins: Employees and clients will be more receptive to digital accounting if they see immediate benefits. Highlighting the time saved from less manual entry and the benefits gained from automation, for example, can help staff members see the potential of their roles to evolve from keeper of historical records to real-time financial advisor.
7. Consolidate Gains and Produce More Change: Use data to establish what changes have driven the best rewards for clients and share best practices across the business.
8. Anchor New Approaches in the Culture: Reward employees who share examples of how they have used digital accounting to achieve a better outcome, and encourage sharing, feedback and open discussion as you adopt new technologies to take your practice to the future.

By adopting a change management mindset, firms can ensure they stay ahead of the curve and have a business set up for long-term success.