Monetary thresholds determining company size likely to be raised by 50%
As part of a drive to cut complexity and burden from legislative reporting requirements, the monetary thresholds that determine company size are being raised by 50% in the UK.
UK Prime Minister Rishi Sunak has announced that company size monetary thresholds will change, as part of a package of measures designed to ease the UK’s regulatory burden with particular regard to non-financial reporting.
Ministers were encouraged to simplify and streamline company size thresholds. The government intends that companies will be able to benefit from the changes for financial years starting on or after 1 October 2024.
If the new measures are adopted, Micro entity thresholds will move from not more than £632,000 turnover to not more than £1m. For small, it will increase to not more than £15m turnover, from £10.2m. The upper medium threshold will move to not more than £54m. Everything above that would classify as a large company. The balance sheet total thresholds would increase to not more than £500,000, £7.5m, £27m and anything above £27m respectively.
The move will take around 132,000 businesses out of non-financial reporting requirements, according to the government, which also plans to remove requirements for what companies must set out in their annual reports and make it easier for companies to file their reports digitally.
The government intends to consult later this year on amending the definition of a medium-sized company for company reporting. The threshold on the maximum number of employees that classifies a medium-sized company would increase from 250 to 500. It will also consult on exempting medium-sized companies from producing a strategic report, and taking smaller public interest entities out of audit tendering and rotation requirements.
In the same speech, the Prime Minister announced that the government will fully fund apprenticeships for small businesses from 1 April, paying the full cost of training for anyone under the age of 21. The government will also increase the amount of funding that can be passed on to other businesses from employers that are paying the apprenticeship levy. Apprenticeships can currently be funded by a levy-paying employer transferring up to 25% of their unused levy to a different employer.
The UK is seen as a global leader in corporate reporting, however, the underlying legislative framework has become increasingly complex, with numerous duplicative and overlapping requirements.
The above announcement importantly removes and rationalises some of the content in the Directors’ Report and Strategic Report – a positive step towards a more streamlined reporting regime.
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