Over 10,000 medium-sized businesses in the UK will become ‘small’ in the coming few years, as the EU Accounting Directive comes into force.
The Directive was approved in June 2013, must be transposed into UK company law by July 2015, and will be in force for accounting periods beginning on or after January 1st 2016.
At that time, new thresholds will reclassify an estimated 11,000 firms that are currently considered to be medium-sized, making them ‘small’ for accounting purposes.
In order to qualify as small, an entity must not exceed at least two of the following criteria in both the current and preceding year:
- Balance sheet total of €4 million
- Net turnover of €8 million
- Average employees total 50 during the financial year
A government consultation has been launched on the UK’s implementation of the Directive, and will close at 11:45pm on October 24th 2014.
Business minister Jo Swinson says: “Any measures that cut red tape and allow more flexibility for financial reporting are a step in the right direction.
“All our companies should be concentrating on growing their business, not spending their time filling out paperwork for their financial accounts if they really don’t have to.”
By simplifying the accounting arrangements for 11,000 companies, the Directive should save both time and money.
According to the Department for Business, Innovation & Skills, this could cut the total cost of accounting by £8 million each year, once the Directive is fully enforced.