News

As we move into 2016, the time is right to look at how we can make changes and improvements to all our businesses. We see a number of areas where there are opportunities and challenges ahead for advisors and our clients.

Economic Outlook

2016 has started with a bang, with global stock markets reeling from the volatility in Chinese share prices and concerns over the extent of the economic slowdown in China. The relatively modest performance of the UK, Irish and US economies compares with the impact of low oil prices on other economies, and overall the picture is uncertain.

We see the major challenges for Northern Ireland businesses in 2016 arising from low prices for agricultural produce, the strength of sterling impacting on exporters and cross-border businesses and the uncertainty an election can bring across the Island. The impact of long-expected interest rate rises in the UK is also likely to hit in late 2016, following the Federal Reserve's decision to increase rates in the US back in December 2015.

Some sectors in NI are clearly thriving, with property making a comeback, IT and technology continuing its strong performance, and the 2016 Year of Food and Drink reflecting the continued importance of this sector for NI businesses.

Other sectors continue to face challenges in particular those dependent on funding and trade with the public sector. We expect to see charities continuing to face tough decisions and an increasing number of charities calling it a day in 2016.

Tax rises for entrepreneurs and small business owners

The impact of changes to dividend taxation were announced in 2015, and have effect from April 2016. What has been less widely documented are the proposals to limit the availability of entrepreneurs' relief on distributions to shareholders from the winding up of a solvent business. We have a separate detailed article on this particular issue, and would encourage all company owners and their advisers to urgently consider the impact of these changes before their planned introduction in April.

Accounting and financial management

2016 will mark the year of implementation of FRS102 and associated international financial reporting standards for Northern Ireland SMEs, as the new standards apply to accounts for all accounting periods beginning on or after 1 January 2015. While this will pose a challenge for clients and their accountants, perhaps the bigger challenge on the horizon is the planned introduction of digital tax accounts and quarterly reporting to HMRC from 2020. This has the potential to redefine the relationships between clients, accountants, the tax authorities and potentially for the worse. The real detail on these plans is expected to emerge in 2016 and the coming years, however the details to date suggest that the whole area of tax compliance and submitting returns is going to become more on a real time basis.

It will be important for accountants and business owners to engage in the consultation process and over 105,000 people have already signed a petition against the measure at the date of writing.

Rising employment costs for many Northern Ireland businesses

All businesses should be planning for the twin impacts of rising Auto Enrolment costs and the introduction of the National Living Wage of £7.20 per hour from April 2016 for workers over the age of 25. With plans for this rate to increase to £9 per hour by 2020, many businesses which have a high proportion of employees on minimum wage will see significant impacts to their profitability and may need to plan now to adapt to these changes.

'Brexit' debate

The UK's potential exit from the EU will increasingly dominate political and economic thinking during 2016 and 2017, ahead of a planned 'in-out' referendum in the months ahead. It remains to be seen whether this debate will lead to a delay in investment decisions from overseas companies while they await the referendum outcome.

2016 will bring many challenges as well as many opportunities. If you would like to discuss any of the issues raised above, please contact Gerard Gildernew, Partner.