New SME accounting regime could pose risk to UK economy, ICAEW warns » SMEInsider

New SME accounting regime could pose risk to UK economy, ICAEW warns

Britain is facing an overhaul of its small business reporting system in order to take the pressure off SMEs – but the fallout could be disastrous.

Nigel Sleigh-Johnson, head of the ICAEW’s Financial Reporting Faculty, has warned that the EU Accounting Directive could have severe implications for the economy.

Only time will tell whether the reduction in the information required in small company accounts  is a sensible reduction in red tape or a source of risk to the UK economy,” he said.

ICAEW for one has persistently warned against the potential risk that over-simplifying reporting requirements can have on the ability of small companies to secure credit.”

The BIS proposals come into effect in July 2015, for financial years beginning on or after 1st January 2016. While they will affect companies across the board, they will primarily relate to small businesses.

Among the biggest changes is a new rule that allows small businesses to prepare and file a new, simplified “abridged” set of accounts, to replace  the abbreviated accounts that can currently be filed at Companies House. There will also be a legal restriction placed on the amount of information that can be required in small company accounts.

Sleigh-Johnson has listed a number of concerns, including that the proposed abridged accounts regime for small companies should  be restricted to companies that have secured shareholder buy-in first.

He is also disappointed that the introduction of the scheme, particularly at EU level “has overall been an exercise in damage limitation rather than one of well-considered, proportionate simplification, and that subsequently the time available for debate about UK implementation has been so restricted“.

Small businesses and professionals connected to them are advised to prepare carefully for the implementation of the new regime. Revised accounting standards are expected to be issued by the Financial Reporting Council shortly.