As we head into a new tax year, businesses are being presented with a myriad of solutions to protect the economy during this difficult time. “It’s important that businesses stay on top of rapidly changing the tax landscape,” says Melissa Geiger, Head of International Tax, at KPMG.
Melissa comments: “It’ll be no surprise to learn that the two words I’ve heard most often in recent weeks are “unprecedented” and “difficult”. For most clients, cash and liquidity is their key concern and the Government has been announcing and refining initiatives on an almost-daily basis to try to support businesses.”
Chancellor Rishi Sunak has provided important measures to protect jobs, including a new Job Retention Scheme (JRS), 12-month business rates holiday, and a wholesale deferral of VAT payments.
Melissa adds: “I share the belief that the JRS is a positive measure allowing businesses to retain talent and reduce costs, while also guaranteeing a level of income for furloughed workers. Some smaller businesses are concerned that the scheme will cost them more than making redundancies, however HMRC will pay the employers’ NIC and minimum automatic employer pension contributions. It makes it a far better alternative to redundancy for all parties, but it is a huge task to implement, and it’s no surprise that there is some confusion over who can benefit.
“With so much focus on the tax policy response to COVID-19, businesses must remember not to take their eye off the day-to-day tax issues.”
In the last few weeks alone:
• The UK’s Digital Services Tax came into force on 1 April
• Changes to IR35 – the off-payroll working rules for individuals who provide personal services via an intermediary – have been delayed until 2021, although businesses still need to prepare for it
• Corporation Tax rate has been frozen, rather than cut by 2%
• And organisations have been told to start planning to ensure compliance with DAC6 – the EU Directive on cross-border tax arrangements – from 1 July.
“There was also the announcement that large businesses will soon be required to report uncertain tax positions to HMRC”, adds Melissa. “This is causing concern among the business community, who worry that it could apply much more broadly than first appears.”
The new normal
“The Budget delivered in March by the Chancellor pointed to increased borrowing, with some of the tougher tax decisions being kicked into the Autumn,” Melissa comments. “However, further down the line we will see the Government under pressure to use the tax system to raise the funds to repay this debt in the future.
“We were already expecting traditional models of taxation to be overhauled by BEPS 2.0, but COVID-19 will focus minds on the need for further reform.
“The success of online retailers at the expense of their traditional rivals will inevitably intensify efforts and the discussion on finding a “fair” way to tax their profits, while the provision of financial support to employed and self-employed workers alike calls into question whether that particular distinction is relevant any more.
“In the coming months I am expecting plenty of measures aimed at reshaping the tax system for the new economy. Employers will need to be patient, and continue to use their time to plan for the uncertainty.”
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About KPMG in the UK
KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 17,600 partners and staff. The UK firm recorded a revenue of £2.40 billion in the year ended 30 September 2019. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 147 countries and territories and has more than 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.