UK Reduces requirements for accounting reports of companies

12.09.2012

As the Business Secretary of the UK Department of Business, Innovations and Skills Vince Cable announced, amendments to companies’ reporting rules will save millions of pounds for small business. According to statistics of the Department of Business, Innovations and Skills audit exemption will save for business from 100 million to 390 million of pounds per year. The net companies profit from introducing of more flexible accounting reporting will probably be 2,4 million pounds per year.

Today small enterprises should comply with requirements of balance sheet total and turnover thresholds in order to avoid audit on the territory of the UK. Revised rules are directed at aligning of mandatory audit thresholds with accounting thresholds. Thus, small and medium-sized enterprises will be exempted from audit in case they meet 2 of 3 criteria relating balance sheet total, turnover and employees amount.

Moreover, most of subsidiaries will also be exempted from mandatory audit in case that the parent company will guarantee their liabilities. This concerns “dormant” subsidiaries as well.

In addition, the Government for increasing of competitiveness of national small and medium-sized business introduces changes allowing companies to prepare accounting report under International Financial Reporting Standards (IFRS).

The rules enter into force in accounting period beginning from 1 or after 1 October 2012.

Expert’s opinion

According to preliminary information of rating Doing Business 2012 which is prepared by the World Bank and International Financial Corporation, the UK is on the 7^th place in world economies’ rating. In 2011 the UK was on the 6^th place. (For reference: the RF is on the 120^th place, Ukraine – 152^nd place. As in the rating of 2011).

This bright signal was correctly perceived by both the UK Government  and business. Reducing of expenses on accounting reporting – will undoubtedly lead to growth of companies registration in popular jurisdictions. Moreover, this measure besides inflows in economy is increasing of tax base for taxpayers, who will benefit from paying to the Crown Treasury.

To add, in order not to turn into a banal offshore registrar, surely, the rules of companies registration will be strengthened. Even now the Register of companies in the UK maintains tight policy in relation to companies who don’t submit reports on time. Delay for accounting reporting leads to fines:

No more than 1 month

Privatу company: 150 GBP

Public company: 750 GBP

For 2^nd and 3^rd month

Privatу company: 375 GBP

Public company: 1500 GBP

From 4^th to 6^th month

Privatу company: 750 GBP

Public company: 3000 GBP

More than half of year

Privatу company: 1500 GBP

Public company: 7500 GBP

If the company had a delay in accounting reporting the previous year – in recurring event fines automatically will be doubled! It should be noticed that besides the Companies House the Inland Tax Revenue also fines! And this only refers to delay in accounting reporting! Submit reports on time! His is wrong when tax which is paid to the Treasury is rather smaller than the fine. Prepare accounting reports in advance.

In my opinion, strengthening of control over law and regulations execution – separates and will filter those part of companies users who consider the English jurisdiction as offshore for grey schemes.

The companies registered in the UK due to transparency improvement of administration and accounting will be more and more involved in tax planning schemes as holding companies – incorporators.

On the basis: http://www.bis.gov.uk/news/topstories/2012/Sep/new-rules-save-businesses-millions-in-accountancy-fees

Julia Akhmetova ( Paralegal of Moscow office Company Honest & Bright)