New rules to save businesses millions in reporting and accountancy fees
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Issue 06 September 2012
- BIS
More than 100,000 UK businesses could save £millions in annual
accountancy and administration costs under reduced auditing and
reporting requirements announced by the Business Secretary, Vince Cable
today.
The Government’s response to the consultation on Audit
Exemptions and Change of Accounting Framework confirms plans
to allow more companies to make a commercial decision about whether or
not to have a statutory audit.
Vince Cable said:
“Reporting requirements have become increasingly demanding and costly
over the years. We listened to business, who made a strong case for
reform, and I am delighted that we are now taking this opportunity to
make audit more flexible and targeted. Tackling these problems will
help save UK companies £millions every year and free them up to expand
and grow their business, which ultimately benefits the entire British
economy.“
Currently, to be eligible for an audit exemption in the UK, small
companies must be less than a certain size in terms of balance sheet
and turnover. The new regulations will align mandatory audit thresholds
with accounting thresholds, meaning SMEs will be able to obtain an
exemption if they meet two out of three criteria relating to balance
sheet total, turnover and number of employees. This change will allow
36,000 more companies to choose not to have an audit.
The Government will also exempt most subsidiary companies from
mandatory audit, as long as their parent company guarantees their
liabilities. A further 83,000 subsidiary companies will benefit.
In addition, another 67,000 dormant subsidiaries will no longer need to
prepare and file annual accounts, provided they receive a similar
guarantee.
Following consultation by the Financial Reporting Council (FRC) on
changes to UK Generally Accepted Accounting Principles (UK GAAP), the
Government has also decided to allow companies that prepare their
accounts under International Financial Reporting Standards (IFRS) to
move to UK GAAP and take advantage of reduced disclosures.
The new regulations will remove EU gold-plating and ensure UK SMEs are
not at a disadvantage compared to their European competitors. These
changes are part of the Government’s wider drive to reduce unnecessary
burdens and make the UK one of the best places in the world to start,
finance and grow a business.
The regulations are expected to come into force for accounting years
ending on or after 1 October 2012.
Notes:
- The Government response and associated documents are
available at http://www.bis.gov.uk/Consultations/audit-exemptions-and-accounting-framework?cat=closedwithresponse
- EU rules state that to be classified as ‘small’ for
accounting purposes, a company must comply with two out of three
criteria in order. Under the current thresholds, SMEs must have no more
than 50 employees; no more than £3.26 million on their balance sheet;
and less than £6.5 million in turnover.
- Department for Business, Innovation and Skills (BIS)
estimates that the new audit exemption measures will save businesses at
least £100m and possibly as much as £390m per year. Final figures will
be provided in the 5th Statement of New Regulation. The net benefit of
permitting companies more flexibility to change their accounting
framework will be £2.4m per year.
- The Government's economic policy objective is to achieve
'strong, sustainable and balanced growth that is more evenly shared
across the country and between industries.' It set four ambitions in
the ‘Plan
for Growth’ (PDF
1.7MB), published at Budget 2011:
- To create the most competitive tax system in the G20
- To make the UK the best place in Europe to start,
finance and grow a business
- To encourage investment and exports as a route to a
more balanced economy
- To create a more educated workforce that is the most
flexible in Europe.
Work is underway across Government to achieve these ambitions,
including progress on more than 250 measures as part of the Growth
Review. Developing an Industrial Strategy gives new impetus to this
work by providing businesses, investors and the public with more
clarity about the long-term direction in which the Government wants the
economy to travel.
About the Author
© Crown Copyright. Material taken from the BIS Department for Business, Innovation and Skills. Reproduced under the terms and conditions of the Click-Use Licence.
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Article Published/Sorted/Amended on Scopulus 2012-09-06 13:56:28 in Business Articles
