The Institute of Chartered Accountants in England and Wales (ICAEW) has warned that the government’s plans to reduce regulatory requirements could have consequences for small businesses in the UK.
SMEs’ top priority
Regulatory requirements are often seen as ‘red tape’by the UK’s small to medium sized enterprises (SMEs). A Lloyds Banking Group survey published in June 2015 indicated that over half (51%) of small companies questioned believed that reducing red tape should be the top priority for the then-recently elected Conservative government.
Reducing red tape
Whitehall responded by initiating a campaign to slash regulatory requirements for companies across the country, according to the Telegraph. They recently announced that from 2016, businesses whose turnover equals less than £10.2 million per annum will no longer be required to have their accounts independently signed off by an auditor; a threshold increase of £3.7 million.
Figures suggest that this will lift 11,000 businesses out of audit requirements, and 98% of companies in the UK will no longer have to carry out a full audit. The policy was welcomed by the Confederation of British Industry (CBI), the UK’s largest business lobbying group. Tom Thackray, acting CBI director for competitive markets argued:“It’s important that the Government helps reduce the burden of red tape for small firms, allowing them to concentrate their time and energy on scaling up.”
Risk to SMEs
The move was questioned by Michael Izza, the chief executive of ICAEW, which represents nearly 130,000 accountants across the nation. Izzasaid: “We understand their concern is to reduce the regulatory burden on business, and this is an aim we fully support. We just believe the savings would be better made in less potentially damaging areas.”
The body added that removing the requirement to have accounts signed off by an independent auditor could expose businesses to fraud, money-laundering and inaccurate tax bills. The government’s definition of the ‘size’ of a small business has increased from an annual turnover of £1 million in 1993, to £6.5 million in 2009. Therefore Whitehall’s drive to reduce red tape will affect every small business in the country.
The move to reduce red tape for businesses with a turnover less than £10 million has been welcomed by the CDI, however, the ICAEW have argued that a lack of account from independent auditors could expose UK SMEs to increased risks which could potentially have a serious impact upon their bottom lines.
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