Reduced Auditing and Reporting Requirements Announced
A decision by the Government could save UK SMEs millions in accountancy and administration costs as it announces reduced auditing and reporting requirements.
The announcement by Business Secretary Vince Cable, is a response to the the consultation Audit Exemptions and Change of Accounting Framework.
Current rules state that UK small businesses are exempt from mandatory audits if they have a maximum balance sheet total of £3.26 million and turnover of less than £6.5 million.
The new regulations will see exemptions for SMEs meeting two out of three criteria on balance sheet totals and turnover and employing no more than 50 staff.
The new rules will see 36,000 small businesses in line to opt for exemption.
Vince Cable said of the new reforms:
“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 of pounds every year and free them up to expand and grow their business, which ultimately benefits the entire British economy.”
Subsidiary companies will also benefit from the new relaxed rules as long as the parent company guarantees their liabilities. It is understood that around 83,000 subsidiary companies will benefit from the rule change.
A further dormant 67,000 subsidiaries will also benefit from the same new rules if their parent business makes similar guarantees about their liabilities.
The Government has also taken into account a consultation by the Financial Reporting Council (FRC) on changes to UK Generally Accepted Accounting Principles (UK GAAP); companies that prepare their accounts under International Financial Reporting Standards (IFRS) can now move to UK GAAP in order to take advantage of the new reduced disclosures regime.
The new regulations are expected to remove "EU gold plating" and allow UK SMEs to compete without disadvantage against their European competitors.
The new rules are expected to come into effect for businesses with accounting years ending on or after the 1st of October 2012.