Simplifying Corporate Reporting

A number of changes to the company size thresholds could soon be implemented following an announcement by Rishi Sunak on 18 March 2024 that the Government are proposing to increase these thresholds. The United Kingdom is no longer required to remain below the maximum thresholds set by the EU for determining whether a company should be treated as a micro-entity or a small, medium or large company. Updating the company size thresholds set out in the Companies Act 2006 is one of the steps that is being planned to modernise UK corporate reporting.

The Institute of Chartered Accountants in England and Wales (ICAEW) has been involved in the consultation process, and if these measures are adopted, it is intended that companies will be able to take advantage of these changes for financial years commencing on or after 1 October 2024.

It is planned to raise the current monetary thresholds used for determining company size by circa 50% to help reduce the legislative reporting requirements for a significant number of companies. It is anticipated that some 131,000 companies will benefit from this increase in the company size thresholds, with approximately 13,000 companies that are currently classed as medium sized falling into the new thresholds for a small company. Those 13,000 companies could potentially take advantage of audit exemptions and benefit from producing simpler financial statements.

The current company size thresholds and those proposed are set out in the following table:

In order to satisfy the criteria to be a certain size, two out of the three above thresholds must be met. Separately, a company will not qualify as a micro-entity, small or medium-sized company if it is ineligible or is part of an ineligible group, which includes a traded company or an insurance market activity.

In addition to these changes to company size thresholds, further consultation by the Government is anticipated later this year on medium sized company reporting requirements, and on exempting smaller public interest bodies from audit tendering and rotation requirements.

It is important to take advice if you believe these changes may impact upon your company and its future reporting requirements. Please contact a member of the corporate team at Scrutton Bland and we will be able to advise on the impact of these potential changes for your company.