The latest government proposals to simplify accounting procedures could significantly reduce administration costs for small businesses. Plans are under review to lower the costs of burdensome red tape for businesses with less than 10 employees. All companies in the United Kingdom currently have to file an annual return to Companies House, along with preparation and submission of company accounts and financial statements.
Under the new proposals, micro companies would complete a statement of trading which is shorter than the profit and loss accounts. Details of creditors and assets would be included in a “statement of position”, which would replace the balance sheet. It is also a possibility that the annual return will be simplified. The changes would be introduced to decrease costs associated with red tape and accounts preparation, according to the Department for Business, Innovation and Skills. BIS also state that the simplified procedures would benefit more than 3.5 million small companies, including sole traders.
However, the head of enterprise at the Institute of Chartered Accountants in England and Wales, Clive Lewis points out that small firms would need the support of other agencies in order to benefit from the changes, including HM Revenue & Customs. The managing director of Accountancy Extra, Stuart Ramsay isn’t so sure of the benefits. He said:
“Businesses will still have to produce their full records for HMRC, and by the time firms have adjusted to the new format, it’s unlikely to be less onerous than preparing a full set of accounts.”
The proposals are still at the review stage and any changes wouldn’t be introduced until 2013 at the earliest.
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