Government proposes to ease reporting burden

More than 100,000 UK small businesses could save in excess of £600 million in accountancy and administration costs every year according to proposals to reduce financial reporting requirements, published by the Department for Business, Innovation and Skills.

The consultation on Audit Exemptions and Change of Accounting Framework sets out plans to allow more small companies and subsidiaries to decide whether or not to have an audit.

Current EU rules mean that to classify as 'small' for accounting purposes, a company must comply with two out of three criteria relating to their turnover, balance sheet total and number of employees. However, to 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 criteria, saving them an estimated £206m per year.

The Government says that this is part of its wider focus on cutting red tape and reducing unnecessary burdens on business, in particular addressing the impact of European legislation.

The Minister responsible for Corporate Governance, Edward Davey, said: "Over time, both the volume and costs of reporting requirements for UK companies have increased, and businesses have stressed to us the need for more flexible and targeted rules. Tackling these problems now will save UK SMEs millions every year and give them more opportunities to expand and grow their business.