Government proposals to reduce accounting costs for small businesses
Oct 19
Financial reporting requirements for SMEs may be reduced under new recently announced proposals. This change could affect over 100,000 businesses in the UK and could save them excess of £600 million in accountancy and administration costs. The proposals cover reducing financial reporting requirements and are published by the Department for Business, Innovation and Skills.
The consultation titled “Audit Exemptions and Change of Accounting Framework” has also set out plans to allow more small companies and subsidiaries to decide whether or not to have an audit.
Under current EU rules classifying a company as “small” for accounting purposes, a company must comply with two out of three criteria. These relate to turnover, balance sheet total and number of employees. To currently obtain an audit exemption in the UK, small companies must fulfil both the balance sheet and turnover criteria. Under the new proposals UK SMEs would be eligible for audit exemption by meeting any two of the three, meaning a potential saving in audit fees of £206 million per year.
The government is also proposing to introduce legislation in 2012 to make subsidiary companies exempt from mandatory audit, provided that their parent company is prepared to guarantee their debts. This would lead to estimated savings of £406 million per year.
These moves are part of the government’s wider focus on cutting red tape and reducing unnecessary burdens on business, in particular addressing the impact of European legislation.
