EU agrees to cut accountancy burden for small limited companies
Posted Feb 22, 2012
The EU financial and economic affairs council has adopted a directive which will exempt many small companies from the accounting obligations they currently have, meaning that most contractor companies will no longer have to submit complex accounts each year.
EU plan to cut the cost of red tape for small companies
The European Commission first proposed to reduce the accounting burden on 'micro entities' in 2009.
With this agreement in place, individual member states can radically simplify the way limited companies have prepare their accounts. The EC says that the changes could result in potential savings of up to 3.5 bn Euros.
Commissioner Barnier welcomed the final agreement, which was made yesterday:
"I am very pleased that today the Council has given its final agreement to measures that will significantly simplify the preparation of annual accounts for more than 5 million of Europe's smallest companies - so-called 'micro-entities'."
What are the new accounting rules?
The new rules will apply to all limited companies as long as they don't exceed a balance sheet total of 350,000 Euro, a net turnover of 700,000 Euro, and an average of 10 employees during the financial year.
In the UK, the rules (when and if adopted by the Government) will enable companies to send their annual accounts to HMRC alone, with the tax authorities responsible for passing on a copy of the accounts to Companies House.
If a Department of BIS discussion paper from 2011 is anything to go by, if the changes are adopted, limited company contractors may be required to submit a simplified trading statement (instead of the current P&L account), a simplified Annual Return (AR01) form, and a statement of position (which would include details of shareholder's funds, fixed assets, cash, debtors, loans, and short and long term creditors).
Will accountancy fees fall as a result?
Of course, many contractors will be asking themselves if these changes mean that average accountancy fees are likely to fall?
This does seem a possibility, however specialist contractor accountancy fees are already competitively priced compared to the cost of accounting generally. In addition, it may be hard quantify how much less work would be involved in accounts preparation in the future, given the number of different duties accountants undertake.
We will publish reaction from some leading contractor accountants in due course.
Contractor Accountants
- Contract Experts - ClearSky Accounting on 08000 325 326
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