Posted by James Pearson on 12 Sep 2013
Small Business Accounts Simplified
The government has just announced new measures to ease accounting red tape for micro-businesses. Business Minister Jo Swinson outlined the government’s response to its consultation on implementing the European Union Micros Directive, published back in 2012 to encourage a drive to reduce small business regulation.
Businesses meeting new “micro-entities” criteria will now become exempt from certain financial reporting requirements, allowing them to just prepare an abridged balance sheet and profit and loss account. Exemption from filing a profit and loss account at all with Companies House will continue. This potentially releases micro-entities from having to adopt the same financial reporting framework as much larger business and recognises the benefit of freeing up more productive time for small business owners.
The simplified rules are intended to apply as soon as possible for financial years ending on or after 30 September 2013, with the number of micro-entity businesses available to benefit being approximately 1.56 million. A micro-entity is defined as meeting two of the following: balance sheet total £316,000; net turnover £632,000; or average number of employees during financial year 10 (or fewer).
Commentary on the changes generally agrees that reducing small business accounting regulation is a positive move, however, caution is being urged in viewing reduced filing requirements as the key factor. Every business has different needs and uses for financial information, and new reduced reporting could create more barriers to accessing finance or diminish ability to interpret financial performance effectively.
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