The Government is proposing to reduce financial reporting requirements for small businesses in a move which could save UK firms more than £600m every year.
The consultation on Audit Exemptions and Change of Accounting Framework sets out plans to allow more small companies and subsidiaries to decide whether or not to have an audit.
Under current EU rules, a company must comply with two out of three criteria to classify as 'small' for accounting purposes: having no more than 50 employees, a balance sheet total of no more than £3.26m or no more than £6.5m in turnover.
To obtain an audit exemption in the UK, small companies must currently fulfil both the balance sheet and turnover criteria. Under the new proposals, UK firms would be eligible for audit exemption by meeting any two out of the three, saving them an estimated £206m per year.
The Government is also proposing to introduce new legislation next year to exempt most subsidiary companies from mandatory audit, provided their parent is prepared to guarantee their debts, saving an estimated £406m per year.
Minister for corporate governance Edward Davey said: "Over time, both the volume and costs of reporting requirements for UK companies have increased, and businesses have stressed to us the need for more flexible and targeted rules. Tackling these problems now will save UK SMEs millions every year and give them more opportunities to expand and grow their business... I encourage businesses to read the consultation document and share their views with us."
The consultation will close on December 29. The document, response form and contact details are available at http://www.bis.gov.uk/Consultations/audit-exemptions-and-accounting-framework