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Exploring efforts to ease the burdens placed on business in respect of non-financial reporting
On 18 March 2024, the government announced its first set of planned regulatory changes which are designed to ease the burdens placed on business in respect of non-financial reporting.
Legislation is planned to be laid this summer to increase the thresholds that determine the size of a company by 50% to cut complexity and burden from legislative reporting requirements.
The effect of the changes is expected to see:
- 5,000 large companies being reclassified as medium-sized to access more proportionate reporting
- 13,000 medium-sized companies falling into the small companies’ regime, enabling them to benefit from potential audit exemption and filing* simpler accounts
- 113,000 small companies falling into the micro-entities’ regime to allow them to prepare simpler accounts.
Of course, small companies and micro-entities are going to be subject to changes to their filing requirements in due course through secondary legislation issued as part of the Economic Crime and Corporate Transparency Act 2023 which is currently awaited.
Planned size thresholds
If the new measures are implemented, the table below outlines the revised thresholds:
| Two out of three of: | Micro | Small | Medium | Large | ||||
| Old | New | Old | New | Old | New | Old | New | |
| Annual turnover | Not more than £632k | Not more than £1m | Not more than £10.2m | Not more than £15m | Not more than £36m | Not more than £54m | £36m+ | £54m+ |
| Balance sheet total | Not more than £316k | Not more than £500k | Not more than £5.1m | Not more than £7.5m | Not more than £18m | Not more than £27m | £18m+ | £27m+ |
| Average number of employees | Not more than 10 | Not more than 50 | Not more than 250 | 251+ | ||||
Further proposals
The government also plans to remove several low-value, obsolete or overlapping requirements from the Directors’ Report and the Directors’ Remuneration Report as well as making it easier for companies to issue digital annual reports. The government also plans to fix some technical issues in the audit regulatory framework which have been identified following the transposition of EU law into UK law.
The government also plans to consult later in 2024 on amending the definition of a medium-sized company for company reporting. This aims to increase the threshold on the maximum number of employees to be classed as a medium-sized company from 250 to 500. It will also consult on providing an exemption from medium-sized companies having to include a strategic report in the annual report and exempting smaller public interest entities from audit tendering and rotation requirements.
Effective date
The government intends that companies will be able to benefit from these changes for financial years commencing on or after 1 October 2024.