More than 100 thousand UK businesses could save in excess of £600 million in accountancy and administration costs every year under proposals to reduce financial reporting requirements, published by the Department for Business, Innovation and Skills today.
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 is also proposing to introduce legislation in 2012 to exempt most subsidiary companies from mandatory audit, provided their parent is prepared to guarantee their debts. Savings are estimated at £406m per year.
The consultation launched today covers the whole of the UK and will close on 29 December 2011.
Notes to editors:
- At present, EU rules mean a company must comply with two out of three criteria in order to be classified as ‘small’ for accounting purposes:
- no more than 50 employees;
- balance sheet total no more than £3.26 million;
- no more than £6.5 million in turnover
- The consultation document, response form and contact details are available athttp://www.bis.gov.uk/Consultations/audit-exemptions-and-accounting-framework
- The Plan for Growth is available at http://www.bis.gov.uk/policies/growth/the-plan-for-growth
- For both audit exemptions and the change of accounting framework, it is proposed that changes will apply for accounting years ending on or after 1 October 2012
- The consultation is relevant to companies and LLPs who are currently subject to mandatory audit, business associations, academics, investors, credit rating agencies, banks, audit and accounting professionals and legal advisers
- BIS‘s online newsroom contains the latest press notices, speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. Seehttp://www.bis.gov.uk/newsroom for more information
Phone: For enquiries please contact the issuing dept