Red Tape To Be Cut 
The Government announced the start of a consultation yesterday, which could see small businesses saving more than £600m in audit fees every year. The consultation on Audit Exemptions and Change of Accounting Framework sets out plans to allow more small companies and subsidiaries of larger ones to change their accounting framework.

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.

These moves are part of the Government’s wider focus on cutting red tape and reducing unnecessary burdens on business, in particular addressing the impact of European legislation.

The Minister responsible for Corporate Governance, Edward Davey, said:

“Over time, both the volume and costs of reporting requirements for UK companies have increased, and businesses have stressed to us the need for more flexible and targeted rules. Tackling these problems now will save UK SMEs millions every year and give them more opportunities to expand and grow their business.

“Audit is very valuable for many companies. But 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.”

The consultation closes on December 29th 2011.

For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk



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