As we’ve all seen, the global outbreak of COVID-19 has put a hold on everyone’s plans for not just 2020, but also 2021. Whether that’s us as accountants, our SME clients or the government themselves, everyone has experienced a significant impact on their day-to-day working life. So how do we move forward?
Coronavirus and its impact
Coronavirus has been a significant detriment to the lives of many small businesses across the UK. As we are currently still in the midst of lockdown with no indication as to whether or not this will be ending on 7 May, there is a huge amount of uncertainty for everyone. So, what will that mean to many small businesses who rely on customer interaction and the public itself? As it stands, we just don’t know. What we can say though, is that despite the propaganda, the media scare mongering and the all-round confusion, the government are working around the clock to find a way to kickstart the economy and get us out as soon as possible.
We have seen this by the introduction of the new government Bounce Back Loan Scheme, introduced on 4 May 2020. This will allow SMEs to borrow between £2,000 and £50,000, 100% guaranteed by the government, with no fees or interest to pay for the first 12 months. The terms will be up to six years, and no repayments will be due during the first 12 months. This could be a game changer for most, if not all, SMEs who are eligible for this loan as it could provide them with the finance they need in order to get their business going again. With small businesses having to deal with all of this, accountancy practices are working around the clock to supply their best knowledge and support to help SMEs through these tough times. A lot of accountancy practices have been lucky enough to not lose clients due to the crisis, and some are busier than they have ever been.
Brexit and VAT implications
While coronavirus is at the forefront of everyone’s minds right now, we also have to contend with the new rules and regulations surrounding Brexit, which will be coming into force as of January 2021. Michael Gove, Cabinet Office minister, told MPs on the House of Commons committee that “Coronavirus in some respects should concentrate the minds of EU negotiators in underlining the importance of coming to a conclusion.” This suggests to us that talks are still underway, and there has been news coming out of Downing Street over the last few days to suggest that extension to negotiations will not be applied.
One of the main significant changes we will see post-Brexit is how we deal with and account for VAT within the European Union. Certain processes have already been announced for how we deal with imports and exports. In order to move goods in or out of the UK, businesses will need a UK EORI number (Economic Operator Registration and Identification) and the organisation in the EU will also need an EU EORI number to receive the goods from a UK supplier. This will hopefully be a pretty smooth process, as HMRC has automatically enrolled companies that are VAT registered and have traded with Europe. The downside to this is it could make things time consuming for clients, as if they don’t receive an EORI number from the off from an EU customer, they will need to request one.
As well as this, we will also need to consider travel and movement restrictions. For those of our clients who rely on travel within the EU, this could be affected when rules are finalised at the end of the year. As it stands, you do not need a visa for stays less than 90 days, passports must have six months left and be less than 10 years old to be valid and travel insurance will be needed to cover trips. While this is pretty much the same as how rules are at the moment, if we end up with a no-deal Brexit, the freedom of movement under EU rules and legislation will cease immediately.
Another consideration is trade relationships. Will a good deal be imposed? Will there be extra import and customs costs? Will checks become more time consuming at borders? These are all items that our clients will need to consider when making their business decisions for 2021, and accountancy practices will need to be on hand to offer the advice needed to project costs and discuss how they budget for the year ahead.
The digital frontier
If there is one thing that COVID-19 is teaching us, it is our ability to really take the digital world with both hands and incorporate it into our working days. As a very heavily digital and tech-focused accountancy practice, we have been able to cope extremely well with problems that the outbreak is throwing at us.
Our adaptive and forward-thinking approach has allowed us to ensure that our clients are nimble and able to move and react quickly during these times with live, up-to-date and accurate data on Xero. We have had many processes in place with our clients from the off to help streamline their finance function using the power of the cloud.
With many other practices being forced to follow suit and really adapt to the new work-from-home ways, the back end of 2020 and the start of 2021 could see the blossoming of a new mentality for all. We will potentially see an influx of subscriptions to accounting software such as Xero (accounting software), Receipt Bank (OCR software for purchases) and Pleo (expense management) as we all move our systems online to cope with the restrictions on leaving the house and meeting our clients.
What we can say is that the future is looking to be a very prosperous time for those accountancy practices who are digitally advanced, and those who are adapting their businesses to this way of thinking. 2021 will be an uncertain time, but one filled with excitement and growth for forward-thinking accountants.
Need advice about the current crisis?
We’ve put together articles on a wide number of items announced as part of the Chancellor’s support package – visit our Coronavirus hub to get all the latest details.
How can we help?
While there will be plenty of disruption over the next few weeks, we’re here to help! To arrange a call, email Julie on firstname.lastname@example.org or complete our enquiry form.