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New proposals to ease the financial and corporate reporting requirements of small businesses, including most IT contractor companies, could result in lower accountancy fees and less red tape.

The discussion paper, 'Simpler Reporting for Smaller Businesses', released last week by the Department for BIS and the Financial Reporting Council, contains proposals to reduce the amount of reporting 'micro-entities' have to undertake.

It is thought that up to five million businesses would make significant savings on accountancy charges as a result - a simplified Trading Statement would take the place of the current Profit & Loss account, together with a simplified Statement of Position.

The current Annual Return (ARO1) could also be simplified as a result of the proposed changes.

The vast majority of contractor companies would be included within these plans; the Competitive Council defines a 'micro-entity' as a company with a turnover under £440,000, net assets of less than £220,000, and fewer than 10 employees.

Around 60% of all the limited companies registered at Companies House meet this definition, as do 3.5 unincorporated businesses (sole traders and partnerships on the whole).

The discussion paper complements recent findings by the Office of Tax Simplification, which was tasked with simplifying small business taxation following Budget 2010. Written responses to the proposals must be submitted to the Department of BIS by the end of October 2011.

Edward Davey, the Minister responsible for Corporate Governance, commented:

"Reducing unnecessary regulatory burdens on the smallest businesses can give them the freedom to innovate and grow - which ultimately benefits the entire economy and is absolutely central to the Coalition's vision for Britain. A new deregulation from EU rules targeted at micro businesses means we now have a chance to deliver these benefits."