“May you live in interesting times” is allegedly a Chinese proverb (or maybe it’s just a quote from 90s film “Disclosure”!) but there is little doubt that we do indeed live in interesting times. To name but a few issues - at the time of writing, the actual outcome of Brexit remains unclear, potential calls for a second Scottish Independence referendum depending on how Brexit does work out remain, and retailers on our country’s High Streets (and their suppliers/stakeholders), which struggled badly throughout 2018, can’t be looking forward to any real respite in 2019.
All the above uncertainty will be impacting on a great number of businesses in the North-East, and any business-owner that thinks the best way forward is to stick their head in the sand and hope it all works out OK is most definitely taking a risk.
Any business with any part of their operations involving other EU countries should be considering having contingency plans drawn up. Changes in import/export tariffs (if any) may have a financial impact, but more simply new customs arrangements may result in delays in importing/exporting goods. What happens if the goods you are importing are delayed? What happens if your customer needs that order by a certain date? Does this cause a problem for your cash flow if your supplier needs to be paid now but you won’t even have the goods until later, let alone received the payment from the end customer?
But there are other issues on the table currently that will impact on businesses regardless of Brexit. The oil and gas sector in the North-East has always had a significant number of Personal Service Companies involved. The Government’s last budget announced changes in the way the taxation of such companies will be viewed by HM Revenue and Customs, beginning in April 2020.
From then, medium and large businesses who contract with PSCs will be responsible for assessing whether employment taxes should be deducted – the change here being that the responsibility currently lies with the PSC itself (long known as “IR35”). Businesses that engage PSCs will have to conduct a thorough review of the relationships they have with these companies, as if HMRC review the position afterwards and determine that employment taxes should have been deducted from payments made to the PSC, then the “employer” can expect to receive assessments for the unpaid taxes and interest/penalties on top.
Small businesses remain outside this change – but PSCs themselves should be wary of this area that HMRC are now taking a very close look at. The legislation underpinning this whole area is complex, and the financial outcomes could be very significant – head in the sand is not the way to go here.
For more information please contact Neil Dempsey (firstname.lastname@example.org) or your usual AAB contact.
To find out more about Neil and the Restructuring & Recovery team, click here.