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Plans to reduce reporting obligations for smaller firms

Countless numbers of smaller businesses could find themselves faced with a much simpler system of reporting their financial position if Government proposals get the go ahead.

A new discussion paper has been published by the Department for Business and the Financial Reporting Council (FRC).

The paper details plans that would make it easier for very small firms to give an account of their business activity, affecting as many as five million micro-businesses.

Businesses covered by the proposals would only have to submit a pared down trading statement instead of the current profit and loss account, along with a simplified statement of position and a streamlined annual return.

Amongst the paper's other recommendations is the introduction of an integrated software package that would enable small businesses to prepare the financial information demanded of them by the Government. The idea is that this would give business owners and managers the space in which to gain a better understanding of the trends affecting the way their firm is performing and the scope in which to plan for the future.

Edward Davey, the minister for corporate governance, commented: "Reducing unnecessary regulatory burdens on the smallest businesses can give them the freedom to innovate and grow - which ultimately benefits the entire economy and is absolutely central to the Coalition's vision for Britain. A new deregulation from EU rules targeted at micro businesses means we now have a chance to deliver these benefits.

"The financial reporting regime must also serve the users of the information published by companies - whether they are customers, banks or government agencies. So we look forward to receiving responses to our proposals from a broad range of interested parties in the coming months."

A micro-business is defined as a firm with a turnover of less than £440,000, with net assets of less than £220,000 and employing fewer than 10 people. Government statistics suggests this definition matches some 60 per cent of companies registered at Companies House and 3.5 million unincorporated businesses.

The new paper, the Government has insisted, is not a statement of official policy. It has been drawn up to gather evidence before the Government decides whether to take forward any further action. Written responses to the proposals should be provided by 30 October 2011.

More details on the paper can be found at: http://www.bis.gov.uk/assets/biscore/business-law/docs/s/11-1100-simpler-reporting-for-smallest-businesses-discussion-paper