The recent increase in VAT on services in the UK has created quite a stir in the accounting industry. As such, some accountants have decided to go ahead and re-classify their services as ‘VAT exempt’ rather than ‘VAT exempt’. However, this is not without reason. There are a number of accounting firms who are able to thrive irrespective of the recent increase in tax due to VAT.
This means thataccounting firms have to cater for a number of clients. Not all clients are UK based. Therefore, there needs to be a UK company with which they work. The majority of accounting firms are UK based. This can be attributed to the fact that the majority of firms need to have branches in the UK and therefore have to cater for a huge clientele base spread across the different islands of the UK.
VAT On Services Charged
For such firms, being VAT exempt allows them to offer a wider range of products and services to their UK clients. Since accounting firms have a vast client base in the UK, being VAT exempt allows them to offer a higher quality service to their UK customers. Therefore, for such firms, being VAT exempt is a benefit that outweighs the benefits that they get by being VAT on services charged. The latest VAT results show that accounting firms have benefited greatly from this.
VAT on services has become a major headache for accounting firms all over the world. However, accounting firms in the UK have been hit hard by this. The recent increase in VAT has meant a hike in clients. This means that even accounting firms who are VAT exempt have seen a sharp fall in their client base.
In such a scenario, it becomes essential for accounting firms to look at ways in which they can reduce their overall expenditure and increase their customer base. This is where they can look at ways in which they can expand their business. The scope of expansion includes taking up new projects and expanding into other areas. There are also other options like combining their existing client base with other firms that offer similar products and services.
This way, accounting firms can ensure that they remain on top of their game. They can do this by ensuring that they offer competitive prices. Competition among the accounting firms in the UK will continue as long as there is still VAT on services. It is just a matter of looking at how they can retain their client base amidst the pressure of competition.
The latest tax changes have further worsened the situation for accounting firms. The changes come into effect on April 2021 and will force accounting firms to implement changes with regards to the way that they operate. Some accounting firms are already facing serious cuts in their profit margins. The latest changes have made things worse for such firms, with the tax rate hike making it tough for them to cope with the burden of the increased tax.
Many accounting firms have already announced that they will be forced to shut down. The closure of such firms would result in job losses and further impact the overall economy. The only way out of the problem that is looming large is for accounting firms to seek help from the VAT consultants. These consultants have extensive knowledge of all the technicalities that come with implementing the new tax changes. This way, accounting firms can plan their business strategies in accordance with the new tax laws. In turn, they can increase the productivity of their employees and reduce the amount of cost that they incur on accountancy every year.