§ Mr. GodsiffTo ask the Secretary of State for Trade and Industry what action he plans to take in the light of the recent consultations on the statutory audit requirements for smaller companies and other simplifications of small company accounting requirements. [117867]
§ Mr. ByersThe consultation on the statutory audit showed wide support for a significant increase in the threshold below which companies were not required to have a full statutory audit of their accounts.
I intend to raise the audit exemption threshold to the maximum level allowed under EU law—£4.8 million turnover. This will be achieved in two stages.
I shall lay an Order before both Houses as soon as possible which would raise the threshold to £1 million this year. This will bring the benefits to the majority of small companies as soon as possible. It has the potential of relieving up to 150,000 small companies from the burden of the statutory audit. We estimate the potential savings as up to £180 million a year.
I intend at a later date to lay a further Order to raise the threshold to £4.8 million, in the light of the conclusions of the independent Company Law Review on small companies. The Review group is considering whether, for companies in the range of £ 1 million to £4.8 million turnover, the audit should be replaced by a lighter, less costly form of assurance. I shall take their final recommendations into account before proposing what, if any, statutory requirement should replace the full audit for companies in that size range.
In addition, I have decided to simplify and reform the law on dormant companies, following a separate consultation. These proposals will relieve the regulatory burdens placed upon dormant companies. The key changes are to:
- remove the requirement for dormant companies to have to pass a special resolution not to appoint auditors;
- require dormant companies which act as agents for other companies to disclose that fact in their annual accounts;
- disregard the payment of certain statutory fees for the purposes of claiming dormancy.
I have also decided that the current thresholds in the Companies Act which define small and medium companies for accounting purposes should be changed to the maxima allowed under EU law. However, this change
406Wwill be made as part of the implementation of wide-ranging proposals on small companies which we expect to emerge from the Company Law Review.