Contributors

Times of unprecedented financial uncertainty

Angela Partington Editor, International Accountant

Atorrent of unexpected events have rained down upon us in recent months. Just as we start to throw off the impact of Covid, the cost of living crisis is now dominating the mainstream media. In the UK, inflation is currently expected to peak at 10.2% in the fourth quarter of 2022, according to the Bank of England. The energy price cap increased by 54% in April, and a further increase of 40% is expected in October, meaning it could reach eye watering levels of £2,800.

Following emergency measures announced on 26 May, an energy profits levy (markedly not a ‘windfall tax’) placed a 25% surcharge on energy firms to target ‘the extraordinary profits of the oil and gas sector’. With a sunset clause of the end of 2025, this levy is anticipated to bring in around £5 billion over the next year alone. However, a new 80% investment allowance will mean that businesses will overall get a 91p tax saving for every £1 they invest, making it almost impossible to be certain how much will revenue be generated.

Whatever it brings in will be put towards a £15 billion emergency financial package announced by Rishi Sunak, consisting of both universal support measures and unprecedented increases in welfare payments this year.

Much of these global financial uncertainties have been driven by Russia’s invasion of Ukraine in February 2022. The subsequent response of countries and international organisations around the world has brought a new focus on financial sanctions and due diligence for accountants operating in the United Kingdom and Republic of Ireland.

In the UK, the Office of Financial Sanctions Implementation may impose monetary penalties if a person has breached a prohibition or failed to comply with an obligation imposed under financial sanctions legislation. In usual cases, this penalty could be £1,000,000, alongside sentencing for criminal prosecutions of up to seven years.

A robust sanctions compliance programme is vital, including national and international screening and monitoring. Accountants and auditors need to apply all their professional skills to make these measures effective, and help companies cope with the disruption they will bring. David Potts considers how to apply appropriate due diligence and mitigate your sanctions risk (see page 22).

In other features, Alex Smith asks whether there is room for improvement in the EU e-commerce package (see page 26); Matt Tyler discusses new research into the impact of IR35 reforms since their introduction and what this means for the accountancy sector (see page 20); and Tilly Michell considers how challenger banks and FinTech are changing the business finance landscape (see page 14).

Contributors to this issue

STEVE COLLINGS

Steve Collings, FMAAT FCCA is the audit and technical partner at Leavitt Walmsley Associates Ltd. In 2010, he became a Fellow of the ACCA.

AVA COLOCHO

Ava Colocho is a Transfer Pricing Senior Manager with CBIZ based in Irvine, California, and specialises in a wide array of intercompany transactions.

TILLY MICHELL

Tilly Michell is a content specialist at Airwallex, creating content that supports company growth, and specialises in tech and business finance.

ALEX SMITH

Alex Smith is a member of the Consulting Services team at Sovos, specialising in providing cross-border advice to a wide range of businesses.

DAVID POTTS

David Potts is director of operations at the AIA, and is responsible for maintaining AIA’s international recognition.

SRINIDHI TUPPAL

Srinidhi is a Transfer Pricing Manager with CBIZ’s National Transfer Pricing Practice, advising clients on transfer pricing and tax valuation issues .

MATT TYLER

Matt Tyler is Kingsbridge’s IR35 Consultancy Manager and has an in depth understanding of IR35 and the case law surrounding the legislation.