§ Mr. Cashasked the Secretary of State for Trade and Industry if he is yet in a position to announce the outcome 248W of the Government's review of accounting and audit requirements for small companies; and if he will make a statement.
§ Mr. HowardThe Government have now completed their review of policy in this area in the light of the many and varied comments received on the consultative document "Accounting and Audit Requirements for Small Firms" published by my Department last June. We are grateful to the many consultees—over 200 in all—who took the trouble to comment.
On accounting requirements, the Government intend to relax the rules governing the amount of information small companies are required to disclose in their accounts. Details of the changes proposed will be announced shortly. The changes will reduce the amount of information companies are currently required to give shareholers while at the same time enabling companies to meet as simply as possible the needs of the Inland Revenue. The changes will also make it easier and cheaper for those choosing to file modified accounts at the Companies Registration Office to do so. By removing certain pages from the shareholder's accounts companies will be able to use the same set of accounts for filing purposes. The interests of individual shareholders will be safeguarded by giving them the right to ask the company for information which, under present arrangements, would be contained in the full accounts.
Current consultations will also be pursued with interested parties on the scope for introducing changes in tax rules which would make it easier for proprietors of businesses wishing to do so to cease trading as limited companies and to trade instead as sole traders or partnerships. Consideration will also be given to changes in company law which might help to streamline the process of disincorporation.
On the audit, the Government have decided to retain the statutory requirement for small companies to have their accounts audited. The consultation revealed no strong balance of opinion in favour of abolition. We are determined to clamp down on fraud and believe that removal of this first defence against fraud would he inappropriate.
The changes in accounting rules will be applied as widely as possible within the limits set by Community obligations. The Companies Act definition of a small company will be extended to cover companies with an annual turnover of less than £2 million and a balance sheet total of less than £975,000. This will significantly reduce accounting burdens for some 90 per cent. of companies. The turnover and balance sheet thresholds for medium-sized companies will also be increased—from £5.75 million and £2.8 million to £8.0 million and £3.9 million respectively.
The Government believe that this package strikes a fair balance between conflicting considerations and will make a real contribution to deregulation. The changes in accounting rules will be implemented as soon as possible.