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09 Jun 2011
ACCORDING TO the Department for Business, Innovation and Skills, small businesses should be delighted with some great news straight from the EU in Brussels.
Given a new fancy label of micro-entities, small businesses will no longer have to produce complicated accounts for Companies House.
Further reading
The new rules allow them to file a simplified balance sheet, which supposedly eases the existing rules for the profit-and-loss account and balance sheet reporting requirements.
It may be just me but I thought this rule already existed for small companies: they currently only have to file a balance sheet plus notes to the accounts with Companies House.
Did nobody tell business minister Edward Davey? Apparently, he thinks this will save 1.5 million small businesses between £150m to £300m a year in reduced administrative costs. So that's a saving of at least £100 per business.
What a load of twaddle. I would love to know how those figures were calculated: fabulous creative accounting.
While it would be unreasonable for me to expect Davey to know all of the detail of company accounts reporting, I don't think it is unreasonable to expect him to check his facts with his team of experts before he announces: "This is a significant step in reducing red tape and a clear signal that we will take action to stop our smallest companies being held back by excessive regulation." A statement made with little reference to reality.
Of course, all of this is in response to the 2011 Budget announcement of reducing the red tape of administration placed upon small businesses.
What about HM Revenue & Customs? I wonder if Mr Davey has spoken about this with David Gauke, who has ministerial responsibility for HMRC.
Small businesses still need to file full accounts at HMRC and the announcement from Brussels seems to do little to change this. How on Earth can one penny be saved in filing an abbreviated version of a still-required full version of accounts?
In fact, HMRC increased the filing burden in April this year when it introduced the need for all accounts to be filed with them electronically in iXBRL format.
So even if the quoted saving of £150m to £300m a year were true, I wonder how much of that has been consumed in HMRC's increased filing requirements?
Then there is the HMRC Records Checks scheme. Not only has HMRC increased the filing burden, it has announced a programme of random visits to check the records of some 50,000 small businesses, threatening large fines for businesses that do not comply with its record-keeping standards.
How does this sit with cutting the red tape? If Davey and Gauke cannot marry up their independent objectives, just what hope do small businesses have?
Come on chaps: get your act together. Give the micro-entities (I hate that title) of tomorrow a chance to prosper.
Elaine Clark is managing director of online accountancy practice CheapAccounting.co.uk
Her Twitter account is @cheapaccounting
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Visitor comments Add your comment
Red tape
These days most of us have good software and it is no effort to press the button to produce abbreviated accounts. You never hear businesses complaining about the burden of abbreviated accounts. If anyone is serious about cutting red tape then they need to concentrate on just two areas (i) employment law (ii) health & safety.
Posted by: Jon Griffey, 09 Jun 2011 | 11:26
Waste of Time
The idea is that this will help the smallest companies cut red tape.
In reality of course, most micro businesses are sole traders, not limited companies and are therefore unaffected by such changes.
For the smallest limited companies these changes could bring a reduction in accountants fees but the requirements to keep proper business records for tax and VAT purposes are likely to remain unchanged so I don't see that companies will actually see any practical difference. With HMRC currently undertaking a push to counter tax avoidance it's unlikely that the tax records rules will be relaxed.
Posted by: TaxTeddy, 09 Jun 2011 | 12:03
Red Tape is Stifling business
Ms Clarke makes a very important point. SME's have suffered a huge cost increase in filing requirements from the Revenue with the iXBRL requiremnt. I recently attended a lecture with a representanive from the Revenue who openly admitted that this was an exercise in passing admin costs from the Revenue over to the Taxpayer. Many very small company's who were able to file PDF attachments now find themselves having to purchase additonal software to comply. This is without all the extra time needed for PIN applications etc. I welcome the Revenue's recently touted initiative to make life easier for access by small agents with small clients - the amount of unchargeable time that is wasted sitting on hold on the phone etc is getting out of hand. Medium and large business start with Small Entrepreneurs - we need these businesses if the economy is to recover and swamping a nascent Entrepreneur with a raft of online filing requirements backed up by draconian fines is not the form of encouragment that will prove effective !
Posted by: victoria wood, 09 Jun 2011 | 12:11
as above
Health & Safety and Employment law are two areas of significant burden which stops small business taking on employees and expanding ( the risk and expense is just too great)
Posted by: Spike, 09 Jun 2011 | 12:20
Limited Liability
Companies, regardless of size, who want to take advantage of limited liability should be required to file full financial statements with the Registrar of Companies, albeit using the FRSSE or some other standard for companies where all the shareholders work in the business.
Sight is being lost of what limited liability is all about.
Posted by: Barbara Whale, 09 Jun 2011 | 13:13