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New proposals to allow more firms to avoid audits

Posted: 2nd November 2011   In: Corporate Commercial

The Government has put forward proposals to allow more small firms to avoid the need to submit audited accounts – saving businesses in the UK an estimated £206m a year.

EU regulations list three criteria by which firms can be regarded as small for accounting purposes. These are: 

To obtain an exemption in theUK, companies must currently fulfil both the balance sheet and turnover criteria. The Government is now proposing to change this so that just meeting any two of the three criteria will be enough to qualify for an exemption. This could free an estimated 36,000UKcompanies from the need to have an audit.

Ministers have begun a public consultation seeking views on the proposals. 

The Minister responsible for Corporate Governance, Edward Davey, said: The proposals we’ve published today are aimed at removing EU gold plating and freeing up enterprise, which ultimately benefits the whole UK economy and will help put us on the path to long-term, sustainable growth. So I encourage businesses to read the consultation document and share their views with us.”

It’s proposed that the changes will apply for accounting years ending on or after 1st October 2012.

Meanwhile, ministers are also planning to introduce legislation in 2012 to exempt most subsidiary companies from mandatory audit. However, this would depend on their parent company being prepared to guarantee their debts. 

It’s estimated that this would save businesses a further £406m per year.

Please contact us if you would like more information about the issues raised in this article.