Member Article

2016 legislative heads up for SMEs

FDR Law provides advice for SMEs on 2016’s main legislative changes

FDR Law, the business specialist law firm is calling for business owner managers to make sure they are ready to cope with the slew of new legislation the New Year is set to bring. With the introduction of new policy and changes to existing bills, FDR Law is advising SMEs across the North West to ensure they are prepared for their impact in 2016.

Oliver Burton, CEO, FDR Law comments; “Many SME’s not only struggle with the costs of adhering to regulation but also the time involved. From reading up on new regulation to the timely administrative overhead of implementation, many small and medium-sized enterprises (SMEs) simply do not have the infrastructure to keep on top of red tape as effectively as they should.

With the Small Business, Enterprise and Employment Act (SEEBA) coming into force next year, bringing with it a complex process as well as a sharp increase in paperwork, there is a real danger for SME’s who could incur hefty fines for failure to comply. As a result, many SMEs could benefit from professional advice in order to be able to cope with the changes.“

For businesses concerned about the forthcoming changes, FDR Law has put together the key areas of legislative and compliance for 2016:-

1. Tax Changes

Many of the Government’s announcements relating to tax and HR policies made in 2015 will take effect over the next 12 months. These include increasing the employer national insurance employment allowance to £3k, in order to encourage SMEs to take on additional staff. Less favourable for owners of smaller firms though will be the higher taxes paid on dividends from April. The current system of dividend tax credits will be replaced by new rates of dividend tax, together with a single

£5,000 ‘allowance’. SMEs will have to review the way they distribute profits to their owners, in particular the balance between salary, dividends and pension contributions.

2. Changes to the Small Business, Enterprise and Employment Act

The Small Business, Enterprise and Employment Act is anticipated to be fully in force by April 2016. This will require all company directors to be natural persons as opposed to a legal person, which may be a private or public organisation. Companies therefore need to start identifying their corporate directors and consider which natural persons would be suitable replacements.

The Act will also require companies to maintain a register of people with “significant control” over the company. A ‘person with significant control’ (“PSC”) over a company is an individual who ultimately owns or controls more than 25% of a company’s shares or voting rights, or who otherwise exercises significant influence or control over a company or its management. It also amends company filing requirements, replacing the need to file an annual return by a duty to deliver a “confirmation statement” at least once a year.

3. HR

Recruitment and Hiring: Pre-employment checks will become more important, with the offence of ‘knowingly’ employing an illegal worker extended to ‘having reasonable cause to believe’ that the worker is illegally employed.

National Living Wage: A mandatory national living wage of £7.20 an hour will come into effect from April 2016 for those aged 25 and over. Proposals to increase Sunday trading hours could also increase wage and other HR costs. There are also plans to curb illegal working, with the Immigration Bill currently before Parliament.

Childcare: A new childcare benefit scheme will enable working parents to claim 20% of childcare costs up to £2,000 per child, while the implementation of the Childcare Bill will double the amount of free childcare available to working parents of 3 and 4 year olds to 30 hours a week during term-time.

Zero Hours Contracts: From April 2016, workers on zero hours contracts will be able to claim unfair dismissal (without any qualifying period) if they are either dismissed for failing to comply with an exclusivity clause or subjected to a detriment for the same reason. Coming into effect in April, The Enterprise Bill will, amongst other benefits, give legal protection to the term “apprenticeship” which will be required to provide on-the-job training, a minimum of 30 hours paid work per week.

Pensions: April will see the introduction of a new flat-rate pension as a result of The Pensions Act 2014 and contracting out for defined benefit schemes will end. By 2018, every employer must provide a suitable workplace pension; thousands must act from this January - visit thepensionsregulator.gov.uk to check when your business must comply - and SMEs face fines if they miss their staging date.

4. Overseas workers

New rules will apply to the recruitment of non-EU workers. January will see the Government’s Migration Advisory Committee (Mac) publish proposals, to be enforced in April, which will reduce the number of overseas professionals working in the UK. The sponsorship of non-EU workers will be limited in sectors where there is not a skills shortage, which could push up the wage bill.

5. Employment status

Current rules are changing, with HMRC proposing stricter tests on whether someone is employed or self-employed. The Government is also cracking down on contractors’ employment status, which could impact businesses that rely on a flexible workforce.

6. Digital and data

Companies must also react to digital regulations. The Electronic Identification and Trust Services (eIDAS) law will be implemented across the EU in July, and will affect how European businesses work together in the digital single market. The law should make it easier for transactions to be completed across national borders. The fast-approaching EU General Data Protection Regulations will also catch up with SMEs in 2016. If a company handles other people’s data it is responsible for keeping it safe, and is bound by law to comply with data protection rules.

With these in mind, it seems 2016 will be a demanding year for smaller businesses when it comes to administration and red tape. If you’re a business and you’re concerned about the changes and would like further advice on these new legislations, please contact Margaret Evens or Stephen Poyner at FDR Law on 01925 230000.

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