The proposals would see micro-businesses - with an annual turnover of less than £440,000, net assets of less than £220,000 and fewer than ten employees - exempt from filing accounts. However, Graydon, a credit referencing agency, and the Institute of Credit Management said the new measures would only damage economic recovery.
It is hoped by the Department for Business and the Financial Reporting Council that by cutting regulatory red tape, SMEs will be liberated from the burden of red tape.
In place of the current requirements to provide a full profit and loss account, the new proposals would see the smallest companies only needing to prepare a simplified trading statement, statement of position and annual return.
They foresee the new proposals would help up to five million companies save money and time that would normally be spent on filing accounts.
Consequently, a poll by ICM of 8000 members revealed that without SMEs’ accounts being available through Companies House or a credit agency, the majority would be hesitant before approving a relatively small order.
More than one-third would insist on money in advance, while 48 percent would ask for additional financial data and 15 percent would trade regardless.
Gordon Skaljak, marketing director at Graydon, said: "Few businesses would risk extending finance to another without first reviewing that business's financials, even in a benign economic environment. This is not the silver bullet the Government is looking for to reduce red tape for businesses."
Edward Davey, minister for corporate governance, said: “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.
He added: “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”.
The consultation is being run alongside the Office of Tax Simplification’s discussion document on ways to simplify taxation for micro-businesses and the deadline for stakeholders to respond is October 30.
ormation, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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