Rethinking the Tax System during Covid-19
The establishment of tax reforms around the globe has accelerated due to the pandemic and the changes it has brought. Tax advisers and businesses have been having a hard time coping with the drastic changes.
Companies have to work constantly if they want to stay in line with the additions in the tax system. Tax teams are working to determine which decision would be beneficial for companies to keep the organization afloat.
An adviser tells of how HMRC is helping businesses all the while protecting their tax revenue. Much new legislations are being pushed forward in a rush to help deal with conflicting needs.
Tax advisers had to deal with a lot of amendments with complexities of CJRS, Coronavirus Job Retention Scheme and saw lists of powers that HMRC wanted to get back funds that had been over claimed. Such draft legislations take a lot of time, however, these will be done within weeks due to their urgency.
Moreover, there is a very slight chance of the legislation to go back to the way they were before after the pandemic.
In the long run, it is predicted that governments will raise taxes. The UK, with its aged population rate, was already going in this direction. However, with the rise of public debt and demand for services, the increase in taxes might involve fundamental changes.
Finance teams of large scale businesses are able to cope with this, however, small companies are hoping for accounting companies to help them find a good solution.
Previous months have been difficult. Things have changed too fast when no one was ready. It does not depend on what your business is or how to used to operate, but about how to deal with it during the current flow of change. A lot of advice can be considered as unreasonable. For example, Employment Allowance usually applies earlier in the year for their employee insurance payments, however, because of the CJRS, the best way is to try later.
Businesses around the world are trying to stay steady, which is why they take advantage of all relief measures available. The world is quite consistent. Governments have applied measures like workforce management and tax deferral. It all comes down to the liquidity and cash flow, which can extend to guarantees and credit facilities.
Tax deferrals have been allowed for struggling companies in a lot of countries like; Japan, Germany, Canada, Bahamas, and Albania. Other countries are providing grants to companies.
Reference is to the rules applied in Singapore and the US, which are good examples of help in the medium run. Take an example of a business that was profitable in 2019, but its profits fell in 2020. This is what you categorize as a good company.
Australia gives its companies the right to cash benefits in the form of development concessions and research. Each business has its own ways of dealing with the crisis. One downfall for companies is that despite the changes in legislation, the tax system is the same as before. Therefore, these changes require attention and patience.