In March 2024, the UK government set out intended regulatory changes to the non-financial reporting framework, focusing on reducing regulation on companies with the objective of ensuring reporting requirements remain proportionate to size.
The government will propose legislation to lift the monetary thresholds that determine company size by 50%. These revised UK company size thresholds will affect how businesses are classified and what they’re required to report.
The potential impact of these changes will mean that:
Small and micro entities will be exempt from statutory audit requirements and will be able to file simpler accounts, including the use of FRS 105 threholds (micro) and FRS 102 1A (small).
However, companies are also reminded that other legislation is likely to come into force later in 2024 requiring all entities to file a profit and loss account at Companies House (Economic Crime and Corporate Transparency Act), alongside numerous other changes to Companies House filing, including the verification of Directors.
Entities that will no longer be classified as large will be able to take advantage of large company disclosure reporting exemptions. This includes an exemption from carbon reporting.
It’s also intended to remove several low-value, obsolete or overlapping requirements from the Directors' Report, Directors’ Remuneration Report and Policy; simplifying digital annual reports and correcting technical issues in the audit regulatory framework that have come about as a result of the assimilation of EU law into UK law.
As well as delivering a proposed deregulation saving of around £150 million per year to UK companies and a further £145 million for small and medium enterprises. It will also reduce the administrative burden involved in preparing annual reports and accounts.
This legislation will need to be enacted through parliament, with the law-making process starting in early October 2024.
Later in 2024, the government propose to consult on the following:
Proposed size and audit thresholds:
Alongside the above, there are other wide-ranging proposed changes, including suggested alterations to disclosures relating to disabled persons in Directors’ Reports, and environmental disclosures.
The proposed audit limit changes sit alongside a broader shake-up of large company thresholds and medium-sized company thresholds. Understanding where your business sits against the new large company thresholds for the UK and medium-sized company thresholds will determine whether you can access simplified reporting, or whether you’ll continue to fall within statutory audit requirements.
For micro-entities, the revised FRS 105 limits will determine eligibility for the simplest form of reporting available. Businesses should also keep an eye on the FRS 105 threshold, as this dictates whether a company can prepare accounts under the micro-entity regime rather than FRS 105A.
Companies filing under the small companies regime should also be aware of the total exemption full accounts rules. The total exemption full accounts threshold determines whether a business can file abridged or full exemptions accounts, and this is expected to shift in line with the wider FRS105 thresholds.
You can read the full impact assessment here.
These proposals have significant implications for business, and we will be monitoring this area closely. We will notify you of any further developments once known, but in the meantime, if you have any questions or concerns you should not hesitate to contact your usual Duncan & Toplis representative, or alternatively contact our audit and assurance team.
You can read the government’s statement here.
