New proposals on company accounts
The European Commission has put forward a new proposal which allow EU member states to abolish the obligations for small companies in the region to submit accounts other than for tax purposes.
The EU have calculated that with the deteriorating economic climate, the additional administrative burden across the region is costing small businesses in time and money in excess of €6bn.
The new proposal, first raised in November 2008 is currently being considered by the European Parliament and the Council of Ministers.
In essence, the proposal is that a new type of a business entity is created to be known as a “micro entity”. Micro entities are defined as very small companies that meet 2 of the 3 following criteria:-
• A balance sheet total of not more than €500,000.
• A net turnover of not more than €1m
• Not more than 10 as an average number of employees during the financial year
From what we understand, member states will be able to implement this in their own jurisdiction if they so wish although they could still require accounts to be prepared.
In practical terms, this will obviate the need for small companies to submit accounts to Companies House and accounts will only need to be sent in to the Inland Revenue.
There will obviously be many implications in different countries if these proposals are implemented. If micro companies no longer need to prepare statutory accounts for filing at Companies House, it may well be that the information that needs to be sent to the tax man can be presented in a much simpler format. The result of this will be a considerable reduction for the companies that would be affected. Of course, this could also have serious knock on effects for accountants who are likely to see their revenues reduced.
Personally, I think this is a great move and although wearing my accountant’s hat, I can see challenges for us, the benefits to our small business clients will be enormous.