Europe to simplify small firm accounts

European business ministers have agreed to cut ‘micro-entities’ red tape, excusing the smallest firms from the burden of certain accounting obligations.

The ministers reached an agreement in Brussels this week that will see the simplification of rules for profit and loss account and balance sheet reporting.

It will allow EU member states the discretion to exempt the smallest companies from filing these accounts; however simplified balance sheet information will still need to be filed at Companies House. While not specifically stated in the government announcement, the simplification process would appear to make audits irrelevant for these companies too.

Business minister Ed Davey said it will benefit 1.5m small British companies and could save firms up to £300m a year.

Member states will now discuss the measures with MEPs, who must also give their approval before the new rules can enter into force.

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Comments

Rubbish

JeremyNewman | | Permalink

All they are talking about is the filing requirement for abbreviated accounts. HMRC will still want full accounts filed in iXBRL format, together with the CT600 & comps in iXBRL. So there is no saving. It's just a cheap headline grab with no substance.

Now, if HMRC were to accept these micro-accounts on paper, with paper CT600 also accept that taxable profit = accounting profit, then there would be a saving.

As it is, I can see no benefit, and any company that has a professional accountant prepare its accounts will notice no difference in costs as all that will happen is that a different output template gets used in accounts production software.

John Stokdyk's picture

"Sadly twaddle"

John Stokdyk | | Permalink

Elaine Clark (aka Cheapaccounting & 2010 Progressive Practice winner) made much the same point on her blog this afternoon. I'm sure she'll be along to make her own arguments here before long, but it's worth quoting some of her comments here.

"[Filing CT600 and full iXBRL accounts with HMRC] is the complicated, time consuming part! The accounts filed at Companies House are just an abbreviated version of those filed at HMRC.

"So in my opinion this saves the average business less than 5 minutes of administration! This comment from business minister, Edward Davey is way off the mark."

elainec100's picture

You did it for me John

elainec100 | | Permalink

Need I say more .... Thanks

There may be more to this than at face value.

ringi | | Permalink

At present companies must create accounts that:

  • Make it clear that the correct tax has been paid including all the “correction” to go from standard accounts to what HMRC thinks’ of as profit.
  • That keep to the accounting standards, however no one apart from the director/share holder sees them and by that time they are so out of date that they don’t provide any management value.
     

So items like capital expenditure must be done in more than one way – lots of additional work for capital expenditure when under the Annual Investment Allowance – including deciding if an item is capital expenditure.

What if company only need to keep books and produce the calculations needed to prove the correct tax had been paid and to show that the company was not trading while insolvent? This is a lot easier for someone that is not an accountant.

(After all, why does a “one man” limited company with only 1 share holder need more accounts then a sole trader?)

Locutus's picture

Business minister Ed Davey needs to speak to HMRC

Locutus | | Permalink

Whilst the EU have (surprisingly!) reduced red tape, from 1 April 2011 HMRC delivered a lorry load of the stuff in the form of iXBRL filing of company accounts.

All of the accouting package software developers have had to release new software to make company accounts iXBRL compliant.  Accounting practices across the country have had to install these updates, which in the case of my own software was a time consuming exercise for me and I would imagine others.

Set up issues aside, each set of company accounts is taking over an hour longer to produce when you iXBRL all of the notes that couldn't be done automatically, try to send it off, get a rejection because a carry foward figure from last year is £1 different to the brought forward this year and then correct it.  It's all going to get even more complicated in a couple of years time when we have to iXBRL the detailed P&L.  This is ultimately a cost that is going to have to be passed on to those small companies I act for.

As for the saving of not sending the accounts to Companies House, I now e-file accounts, so the "saving" is however long it takes to press "send".

On a side note, where are Companies House going to get their money from if they can't impose huge late filing penalties on 1.5 million small companies?  An increase in annual return filing fees, or perhaps penalties for filing the annual return late?

3569787's picture

Headline grabbing non-event

3569787 | | Permalink

More political headline grabbing without substance!

Until the unrealistic requirements of HMRC are addressed, along with employment related issues of H&S, mat&pat leave, hiring and firing, etc. small businesses will not save a penny from this government.

One way to cut these EU imposed burdens is to LEAVE the EU. Its long overdue, as the EU is a trade embargo grouping that no longer works! Or allows others to work! Lets get out NOW.

carnmores's picture

how marvellous

carnmores | | Permalink

no sooner have we tooled up for ixbrl than they abolish it  ;-)

elainec100's picture

They haven't changed iXBRL

elainec100 | | Permalink

This is only companies house reporting - no changes announced at HMRC. Hence the reason it is a load of twaddle

carnmores's picture

err......

carnmores | | Permalink

that was a joke

 

PS i dont think a policy statement has been issued yet on the so called 'micro-entities' has it?

DMGbus's picture

Late filers will benefit

DMGbus | | Permalink

I have identified a very small minority of companies who really WILL benefit from this deregulation.

The late filers - no more £150 (becomes £300 second year late) etc. penalties for them.

They then have a 12 month HMRC CT600 filing obligation instead of the 9 months (used to be 10  months) Companies House deadline to concentrate meeting.

I suppose Companies House might take a "business decision" to then compensate for this loss of penalty revenue by either increasing penalty levels or reducing filing deadlines even further for those not benefitting from this deregulative measure.

 

Simplification !!!!!!!!!!!!!!!

laronde123 | | Permalink

Its seems to me that small limited companies should be able to file one form that provides all information HMRC require this could be done by extending CT600 to include detailed P&L info.

The new CT600(company tax form) can then be used by credit firms/ banks by making direct request for copies of the filed form with applications.

The bottom line is that most micro business do not keep proper accounts and therefore without the assistance and overview of an accountant would not be able to produce accurate accounts.

Simplification is the answer not stupification. tax sometimes has to be taxing.

 

 

 

 

I do think that this needs to

esimps | | Permalink

I do think that this needs to be changed as the submission method simply causes a headache for everyone involved.

 

Emma // cheap accountant