2006: AA gazes into the crystal ball

2005 has been a bumper year for accountants, with regulation driving revenues
up by double digit figures. What does 2006 hold? rounds up
next year’s likely developments.

• The influence of the pensions regulator will increasingly be felt by UK
business. A-day in April will change the way in which pension rules work, and
the introduction of the risk-based levy, as well as ongoing rows about how to
fund the UK’s pension system, will continue to unsettle British business. FDs
are likely to seek a closer relationship with the Regulator.

• Increases in M&A activity this year look set to continue, whilst a host
of big name IPOs will keep the city buzzing throughout the year. Standard Life
plans to float later this year, whilst other companies tipped to join the public
markets include QinetiQ, Kasmunigas, African Arabian and CMC. More
speculatively, 2006 could see Debenhams, United Biscuits, Ocado, Experian, Flybe
and Three all go public. Private Equity firms have also assembled a vast
warchest of funds, and some think we could see the first venture capital buyout
of a FTSE100 company.

• Many of the corporate tax cases in front of the ECJ will reach a climax.
The 3G licence VAT case is set to be heard in February, whilst the advocate
general’s decisions on two other direct tax cases are also expected at the end
of that month. The group relief M&S case, meanwhile, will return to the UK
courts to see further details hammered out.

• Business failures are predicted to peak, whilst personal insolvencies will
continue to rise.

• Europe will continue to seek a greater role in regulating UK audit and
accounting in general. There are plans for a liability cap, and proposals to
draw up a common European tax base.

• The debate about competition amongst the Big Four will continue to rage.
Could we see some grand manoeuvres from the mid-tier to challenge the top firms,
and will the government seek to intervene to create more competitive forces?

• Will the tax avoidance row die down? HMRC seems lacking in ideas at
present. The Revenue does want to reopen the issue of filters on the disclosure
scheme for direct tax. Does that presage a new row, or just that the government
doesn’t know what to do next?

• The government has to decide what to do with the unholy mess that is the
OFR, ditched as a requirement earlier this year. A business review will be
required, but many are still unhappy.

• HMRC is facing a judicial review of its conduct in relation to private
equity firms and the deductibility of interest against profits, with officials
thought likely to take the stand to defend their conduct.

• The impending Carter Review may introduce greater incentives for online
filing of tax returns.

• Competition amongst the accounting practice networks will intensify as
rumours of Microsoft joining the market increase.

• The overall economic outlook at present is not positive. Growth is set to
be below government expectations, and some are not confident about the future,
with the retail sector suffering in particular.

• Foreign SEC-registrants will have to start meeting 404 requirements on
internal control.

• There will be continued calls for a single institute voice for the
profession. Will the institutes manage to stop squabbling?

• Philip Broadley of Prudential will take centre stage amongst accountants as
chairman of The Hundred Group.

• Companies will produce their first full-year results under International
Financial Reporting Standards. The rules will themselves be the subject of
further debate as they are refined and implemented.

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