UK Government Alters Accounting Rules for Smaller Firms and Businesses

The UK government will soon make changes to its rules for small business firms’ bookkeeping, business accounting and finance requirements.

According to a Global Tax News article (sourced on 23/02/15), the government’s recent implementation of the European Union Accounting Directive means that a greater number of firms and businesses will now be classified as small businesses, and thus changes these business’ requirements when they work with local bookkeepers and accounting firms. As a result, the UK Financial Reporting Council (FRC) has released a series of proposals that would amend the current rules regarding business accounting services.

The FRC says its proposed changes will benefit as many as 1.5 million of the country’s smallest “micro-entities” making their accountancy services’ reporting requirements simpler. An additional 1.5 million businesses will be impacted by the change as well.

Currently, approximately 74,263 people work for some 11,425 accounting companies throughout the UK. These firms primarily assist individuals and businesses big and small plan their finances and meet their financial goals and prepare their tax information.

In the FRC’s proposals, the current Financial Reporting Standard for Smaller Entities would be removed, with a new, simplified business accounting standard for small businesses and micro-entities put in place. This new standard would allow small companies to comply with the new UK Generally Accepted Accounting Principles and would be giving them more flexibility in the format of their profit, loss accounts and balance sheets, Global Tax News reports.

The proposed rules would apply to micro-entities and small businesses with annual turnovers of £632,000 or £10.2 million, respectively; applicable companies would be required to have no more than 10 or 50 workers, respectively, as well.

“Many micro-business owners and freelance workers … will stand to benefit, as they will be released from the most complex aspects of the accounting requirements of the current reporting regime,” says Danielle Stewart, Head of Financial Reporting at chartered accounting firm Baker Tilly.