• Register
Return to: Home > News > Regulation > Government exempts UK SMEs from statutory audit

Government exempts UK SMEs from statutory audit

Small UK businesses will be exempt from having a mandatory statutory audit as the government relaxes auditing and reporting requirements.

The Department for Innovation Business and Skills (BIS) has made the changes in response to the consultation Audit Exemptions and Change of Accounting Framework and will now allow more companies to make a commercial decision about whether or not to have a statutory audit.

The new regulations will align mandatory audit thresholds with accounting thresholds, meaning Small-and-Medium sized Enterprises (SME) will be able to obtain an exemption if they meet two out of three criteria relating to balance sheet total, turnover and number of employees.

This change will allow see 36,000 more companies with the ability to choose not to have an audit. This is likely to have an impact on accounting firms who provide assurance services to these companies.

The government will also exempt most subsidiary companies from mandatory audit, as long as their parent company guarantees their liabilities, thus a further 83,000 subsidiary companies will benefit, while a further 67,000 dormant subsidiaries will no longer need to prepare and file annual accounts, provided they receive a similar guarantee.

Business secretary Vince Cable said reporting requirements have become increasingly “demanding and costly over the years”.

“We listened to business, which made a strong case for reform, and I am delighted that we are now taking this opportunity to make audit more flexible and targeted. Tackling these problems will help save UK companies millions every year and free them up to expand and grow their business, which ultimately benefits the entire British economy,” Cable explained.

IFRS on the back burner

Following consultation by the Financial Reporting Council on changes to UK GAAP, the government has also decided to allow companies that prepare their accounts under IFRS to move to UK GAAP to take advantage of reduced disclosures.
BIS also said the regulations will remove “European gold-plating and ensure UK SMEs are not at a disadvantage compared to their EU competitors”.

The changes are part of the government’s wider drive to reduce “unnecessary burdens and make the UK one of the best places in the world to start finance and grow a business”.
The regulations are expected to come into force for accounting years ending on or after 1 October.

Top Content

    Choosing the right location can have cast-iron benefits

    As Game of Thrones, one of the biggest television shows of all time, comes to an end, Joe Pickard looks at how tax incentives offered to television and film production companies help the wider economy.

    read more

    Primary financial statements: a game changer in reporting?

    International Accounting Standards Board chair Hans Hoogervorst delivered a speech at the Seminario International sobre NIIF y NIF, organised by the Consejo Mexicano de Normas de Información Financiera in Mexico. The Accountant presents the highlights.

    read more

    FASB readies standards for the netflix generation

    The US Financial Accounting Standards Board (FASB) has updated its accounting standard for entertainment, with a specific eye on keeping up to date with how episodic content, such as television programmes, is consumed in the modern world. Jonathan Minter reports.

    read more

    Brexit: why it takes two to tango

    Former TA editor Vincent Huck, now editor of Insurance Asset Risk, looks at why Brexit might unleash geopolitical intrigue in Europe’s accounting standard-setting scene – and why IFRS 17 will be an incredible source of opportunity for firms in the coming years.

    read more
Privacy Policy

We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.