An estimated 11,000 UK medium-sized businesses could benefit to the tune of £8 million a year as a result of planned changes to accounting rules.
The measures, which would bring the EU’s new Accounting Directive into UK law, would allow companies to prepare and file simpler, less detailed accounts with Companies House. These documents currently include the balance sheet, the profit and loss account and the notes to their financial statements.
The actual level of detail they prepare and submit depends on the size of the company, which is decided by referring to three thresholds – the average number of employees, the balance sheet total and net turnover at the balance sheet date.
The UK government is proposing that the upper limits are used in these categories when determining if a business is classified as a small company.
This would see 11,000 companies, for accounting purposes, move from being classified as a medium-sized company to small. As a result, their reporting would need to be less detailed, reducing the costs involved.
Under the proposals, a company would be classified as small for accounting purposes, if it does not exceed at least two of the following:
- balance sheet of £5.1 million
- net turnover of £10.2 million
- an average of 50 employees.
Announcing the launch of a consultation on the proposals on 1 September, Business Minister Jo Swinson said: “Any measures that cut red tape and allow more flexibility for financial reporting are a step in the right direction. All our companies should be concentrating on growing their business, not spending their time filling out paperwork for their financial accounts if they really don’t have to.”
The consultation closes on 24 October.
The UK is required to bring the Accounting Directive into UK law no later than 20 July 2015. However, the government proposes to take up an option permitting that the changes may first apply to financial years beginning on or after 1 January 2016.
It will also consult on whether companies should be able to apply the new regulations ahead of this date.
Our audit and accountancy services in Bristol, London, Taunton, Yeovil and Bath are individually tailored to meet our clients’ needs, regardless of their size. We can also work alongside in-house finance departments or bookkeepers for smaller businesses.
While many business owners view an audit as a costly way to stay compliant with the regulatory authorities, we see it as an opportunity to carry out an annual health check to monitor the ongoing development of that business.
At Milsted Langdon, we make sure we gain a full and thorough understanding of our clients’ businesses. This enables us to use audits to identify weaknesses and find ways to improve efficiency and profitability, such as taking advantage of early tax planning opportunities.