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Simpler Corporate Reporting

Volume 747: debated on Tuesday 19 March 2024

Yesterday, the Government announced our first set of intended regulatory changes as part of our commitment to make the non-financial reporting framework smarter, simpler and better for business. These changes focus on reducing regulation on small and medium-sized companies, ensuring that reporting requirements are proportionate, so that those companies can focus on their growth and delivering for their customers.

The Government intend to lay legislation this summer to lift the monetary thresholds that determine company size by 50%, in order to take account of inflation and to reduce burdens on smaller businesses, a change that we are able to make following the UK’s withdrawal from the European Union—see table. Overall, the effect of these changes is that 5,000 large companies would be reclassified as medium-sized and access more proportionate reporting; 13,000 medium-sized companies would be reclassified as small companies, enabling them to benefit from exemptions to statutory audit requirements as well as the ability to file simpler accounts; and 113,000 small companies would be reclassified as micro-sized companies, which will allow them to file simpler accounts—a benefit for more than one in every four businesses that are currently classified as small.

2 of 3 out of:

Micro

Small

Medium

Large

Old

New

Old

New

Old

New

Old

New

Annual turnover

nmt* £632k

nmt £1m

nmt £10.2m

nmt £15m

nmt £36m

nmt £54m

£36m+

£54m+

Balance sheet total

nmt £316k

nmt £500k

nmt £5.1m

nmt £7.5m

nmt £18m

nmt £27m

£18m+

£27m+

Average number of employees

nmt 10

nmt 50

nmt 250

251 +

*nmt = not more than

The Government will also remove several low-value, obsolete or overlapping requirements from the directors’ report, and from the directors’ remuneration report and policy; make it easier for companies to issue digital annual reports; and fix some technical issues in the audit regulatory framework that have been identified following the assimilation of EU law into UK law.

In total, these changes will deliver a deregulatory saving of around £150 million per year to UK companies, with small and medium-sized companies set to benefit by approximately £145 million per year.

The regulations will directly benefit both preparers and users of annual reports and accounts. They will remove low-value and duplicative information and make annual reports shorter, more navigable and better focused. Preparers of annual reports—UK businesses up and down the country—will have more time to spend on running their business. Users of reports—investors and shareholders—will be able more easily to access relevant information to support effective decision making.

By refining the framework and delivering deregulatory cost-savings for business, the Government are taking action to strengthen the UK’s business environment and our international reputation as a great place to do business.

And the Government intend to go further. The Government intend to consult later this year on amending the definition of a medium-sized company for company reporting so that the threshold on the maximum number of employees to be classified as a medium-sized company is increased from 250 to 500. It will also consult on exempting medium-sized companies from having to produce a strategic report and on exempting smaller public interest entities from audit tendering and rotation requirements. This will further reduce the bureaucratic burden on companies that are the lifeblood of the UK economy, meaning that they would not be subject to the more stringent reporting and accounting requirements faced by large businesses. I will update the House on these further proposals in due course.

[HCWS354]