Published: 07 Oct 2011
Last Updated: 06 Nov 2012
Not the most exciting subject in the world, but a small victory for the anti-red tape contingent nonetheless: the Department of Business, Innovation and Skills has launched a consultation into proposals which could do away with EU ‘gold plating’, exempting an extra 100,000 small companies from audits, thereby saving them £206m a year. And that’s not all – if the proposals are put through, thousands of subsidiaries of larger companies could also benefit. Which should give businesses a little bit more confidence…
The change to existing regulations looks minor, but with the average audit costing a little under £10,000, businesses will save a lot if the new plans are approved. It’s all a bit convoluted, but at the moment, to be classified as ‘small’ for accounting purposes, business must meet two of three criteria: 1) fewer than 50 employees, 2) no more than £3.26m on the balance sheet and/or 3) a turnover of less than £6.5m. However, to qualify for an audit exemption, it’s got to be the latter two – ie. it must have a small(ish) balance sheet and a low(ish) turnover. Under the new rules, though, it wouldn’t matter which two businesses comply with: so in effect, any company that qualifies as ‘small’ would be automatically exempt from audits.
The twist is that it’s not just small companies that could benefit from the new rules: apparently, 83,000 subsidiaries of larger companies could also be freed from audit regulations, as long as their parent companies are willing to guarantee their debts. That could save companies between 10% and 25% of their annual audit costs – totalling about £406m a year. Not a substantial amount, when you take into account the amount big business spends on audits each year. But a good start, nonetheless…
With the economy teetering perilously on the edge of a double-dip, this is arguably is exactly the sort of thing businesses need to reassure them that Government is on their side. As Adam Marshall from the British Chambers of Commerce put it, ‘if they can deliver steps like this on a regular basis, business will start to gain confidence in the deregulatory push.’ But, as he added: ‘it really is a question of delivering change like this week in, week out.'
The change to existing regulations looks minor, but with the average audit costing a little under £10,000, businesses will save a lot if the new plans are approved. It’s all a bit convoluted, but at the moment, to be classified as ‘small’ for accounting purposes, business must meet two of three criteria: 1) fewer than 50 employees, 2) no more than £3.26m on the balance sheet and/or 3) a turnover of less than £6.5m. However, to qualify for an audit exemption, it’s got to be the latter two – ie. it must have a small(ish) balance sheet and a low(ish) turnover. Under the new rules, though, it wouldn’t matter which two businesses comply with: so in effect, any company that qualifies as ‘small’ would be automatically exempt from audits.
The twist is that it’s not just small companies that could benefit from the new rules: apparently, 83,000 subsidiaries of larger companies could also be freed from audit regulations, as long as their parent companies are willing to guarantee their debts. That could save companies between 10% and 25% of their annual audit costs – totalling about £406m a year. Not a substantial amount, when you take into account the amount big business spends on audits each year. But a good start, nonetheless…
With the economy teetering perilously on the edge of a double-dip, this is arguably is exactly the sort of thing businesses need to reassure them that Government is on their side. As Adam Marshall from the British Chambers of Commerce put it, ‘if they can deliver steps like this on a regular basis, business will start to gain confidence in the deregulatory push.’ But, as he added: ‘it really is a question of delivering change like this week in, week out.'
