The UK’s accountant-in-chief has issued a stark warning that new rules designed to cut red tape for small businesses could increase the risk of crimes going undetected and reduce public trust in British business, reports The Telegraph.
From next year, businesses that turn over less than £10.2m a year will no longer have to get their accounts independently signed off by an auditor, raising the limit from £6.5m.
The change – part of Business Secretary Sajid Javid’s push to slash regulation for UK companies of all shapes and sizes – will lift an estimated 11,000 businesses out of audit requirements, and means that 98pc of Britain’s businesses will not have to carry out a full audit.
The Government plans to adopt the highest possible thresholds allowed as part of a new EU accounting directive in order to minimise the burden of red tape on small firms.
However, the Institute of Chartered Accountants in England and Wales(ICAEW) last night cautioned that the decision would leave companies vulnerable to fraud, money-laundering and inaccurate tax bills.
Michael Izza, chief executive of the ICAEW, said the body, which represents almost 130,000 accountants across the UK, is holding talks with the Department for Business, Innovation and Skills about its fears.
“We understand their concern is to reduce the regulatory burden on business, and this is an aim we fully support. We just believe the savings would be better made in less potentially damaging areas,” said Mr Izza, who has in the past chaired a number of Treasury working groups.
Bodies such as the Association of Chartered Certified Accountants have said raising the threshold to £10.2m would risk the livelihoods of many small and sole-practitioner auditors.
The size of a “small business” has been growing steadily in Britain, from a yearly turnover of £1m in 1993 to £6.5m in 2009, the last time the audit threshold was raised.
According to the Office for National Statistics, more than 98pc of all businesses had revenues of less than £10m a year in 2014.
The CBI, Britain’s biggest lobby group, meanwhile, is welcoming the drive to reduce the regulatory burden. “It’s important that the Government helps reduce the burden of red tape for small firms, allowing them to concentrate their time and energy on scaling up,” said Tom Thackray, acting CBI director for competitive markets.
