Performing statutory accounting, including filings for both HMRC and Companies House, is essential for every UK business. Just as essential is making sure you and your finance team are prepared for any reforms and changes, especially in unpredictable times like these – how many of us expected the changes announced in the mini-budget? To make sure you and your team are up to date on the changes coming over the next two years, this article will summarise the key elements you need to watch out for, giving insights on the possible impacts, how these changes will affect you, and the effect of Britain’s changing political climate on corporate regulation going forward.

The ’mini-budget’

No sooner had I sat down to write this blog, than Kwasi Kwarteng, the newly-minted Chancellor of the Exchequer, announced the so-called ‘mini-budget’ – while talk of tax cuts and reaching a 2.5% growth rate filled headlines, the devil of this mini-budget is in the details. Here are some of the highlights:

1. IR35 scrapped: The scrapping of the IR35 off-payroll working rules was announced as part of the mini-budget on Friday, and from April 2023 it will no longer be in effect. Working in a recruiting consultancy, our office erupted in cheers at the announcement – the controversial regulations, introduced for the private sector in 2021, made organisations responsible for the working status, taxes, and national insurance of so-called ‘in scope’ contractors. Determining which roles were and were not in scope has been the bane of recruiters, payroll managers, and HR teams for over a year now, and many will be glad to see the rules go. Expect to see a resurgence in contract workers, and a reduction in paperwork for your organisation.
2. Investment Zones: As the CIPP reports, English local authorities will now be able to become ‘investment zones’ – areas of lower taxes and looser regulation intended to boost business and stimulate local economies. The zones will offer new or expanding businesses within the zones 100% business relief for a fixed, ten-year period, full tax and stamp duty relief for property purchased for commercial use, plus zero-rate employer NI contributions up to £50,270 for new employees. It will pay dividends to see if your local area becomes a zone, if moving to a zone will save you money, and to make sure your company qualifies as a new or expanding existing company.
3. Tax Cuts: Finally, the one everyone’s been talking about – the tax cuts. These include the cancelling of the planned corporation tax hike from 19% to 25%, the reversal of recent national insurance hikes, and changes to the basic and higher rates of income tax. PM Liz Truss talked extensively about tax cuts throughout her Conservative leadership campaign, and the first such cuts are coming to pass barely a month into her term. This won’t directly affect the statutory process for HMRC or Companies House, but the extra money from lower taxes will likely mean more cash flow to manage and report on.

The decision to relax rules and lower taxes is significant as it not only represents a bold early move by the new government, but a sharp reversal on how the previous government under Boris Johnson and Rishi Sunak did things – for an example, let’s have a look at the recent reforms at Companies House.

Companies House reforms

Back in March 2022, a fresh tranche of reforms to the filing process at Companies House were announced, with a view to improve corporate transparency and prevent financial crime: the Economic Crime (Transparency and Enforcement) Act 2022 and the Corporate Transparency (Register and Reform) whitepaper. These reforms include:

• Registry of Overseas Entities: The addition of this new registry in August is one of the biggest changes to the duties of Companies House. This record of property bought by overseas owners will be “at the heart of a new global standard for transparency,” according to Louise Smyth, Chief Executive and Registrar of Companies.
• More Filings for Small Business: One provision proposed in the Economic Transparency Whitepaper was small businesses needing to file unabridged accounts, including directors’ reports and profit/loss sheets, and micro-entities needing to file profit/loss sheets as part of abridged accounts, the ICAEW observes.

Why do I mention reforms, now several months old, some of which are still in the whitepaper stage? Because it is my opinion that they stand in stark contrast to the mini-budget. Truss and Kwarteng’s plan, a fast-and-loose gamble to build growth already being called “the most dramatic, risky, and unfounded mini-budget,” is based on lowering taxes and loosening regulations. The tightening regulations around transparency and reporting being pushed by Companies House, then, seem rather fragile – as important as ethics and transparency certainly may be, if the new government decides these reforms will inhibit growth, they could well end up on the chopping block. This assumes, of course, that Truss lasts long enough as Prime Minister to reverse the progress of Companies House.

Conclusion

The UK’s statutory process finds itself at a crossroads between the high-tax, high-regulation days of Johnson and Sunak and the low-tax, low-regulation days of Truss and Kwarteng. Some will applaud the removal of unnecessary red tape – I, for one, will not miss IR35 – while others will have genuine concerns about standards of corporate transparency declining going forward. If the new Prime Minister survives the worsening cost-of-living crisis Britain faces this winter, we may well see a 180 on statutory regulation; on the other hand, if her administration crumbles, the more stable institutions of Companies House and the rest of the Civil Service may continue their push for ethics, transparency, and the expansion of Britain’s administrative state.

Sources

• BBC, ‘At-a-glance: What’s in the mini-budget?’ | https://www.bbc.co.uk/news/business-62920969 (Accessed 25-09-2022)
• CIPP, ‘What do the new investment zones mean?’ https://www.cipp.org.uk/resources/news/what-do-the-new-investment-zones-mean.html (Accessed 20-09-2022)
• ICAEW Insights, ICAEW, ‘Companies House reform: key changes and affected areas’ | https://www.icaew.com/insights/viewpoints-on-the-news/2022/mar-2022/companies-house-reform-key-changes-and-affected-areas (Accessed 25-09-2022)
• The National, Readers of, ‘Liz Truss can’t deliver on what cost-of-living crisis demands’ | https://www.thenational.scot/politics/21263333.liz-truss-cant-deliver-cost-of-living-crisis-demands/ (Accessed 25-09-2022)
• Sky News, ‘Mini-budget: Chancellor denies gambling with economy as pound sinks to near historic lows’ | https://news.sky.com/story/mini-budget-chancellor-denies-gambling-with-economy-a-pound-sinks-to-near-historic-lows-12704339 (Accessed 25-09-2022)
• Smyth, Louise, GOV.UK, ‘What the Economic Crime (Transparency and Enforcement) Bill and the corporate transparency and register reform white paper means for Companies House’ | https://companieshouse.blog.gov.uk/2022/03/03/what-the-economic-crime-transparency-and-enforcement-bill-and-the-corporate-transparency-and-register-reform-white-paper-means-for-companies-house/ (Accessed 25-09-2022)
• Webber, Ashleigh, Personnel Today, ‘IR35 Reforms to be scrapped in April 2023’ | https://www.personneltoday.com/hr/ir35-reforms-scrapped-april-2023/ (Accessed 25-09-2022)