• 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

    ARGA team, assemble!

    The new top team has been named that will see in root-and-branch reform at the Financial Reporting Council (FRC) as it transforms into the Audit, Reporting and Governance Authority (ARGA). Will the new duo be as dynamic as some are hoping? Robin Amlôt reports.

    read more

    FASB: a quest for simpler standards

    FASB chair Russell Golden addressed the IMA 2019 Annual Conference and Expo at the Sheraton San Diego Hotel and Marina, California, on 18 June. IMA immediate former chair-emeritus Alex Eng acted as moderator. Joe Pickard reports.

    read more

    The future of audit, and how to get there

    Two recent reports peer into the future of the audit profession. One analyses what an audit should offer, while the other looks at how the audit process will be carried out. Robin Amlôt takes a closer look at both.

    read more

    EFAA elects new president, focuses on digital future

    EFAA’s new president, Salvador Marin, outlined his key priorities for the next two years at the organisation’s 2019 annual general meeting, while outgoing president Bodo Richardt offered advice. Robin Amlôt reports.

    read more


    As the Coronavirus (COVID-19) continues to spread across the world, the International Accounting Bulletin and The Accountant will be collating all the latest news and updates from the profession on the pandemic’s impact.

    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.