Last week the European Union moved one step closer to simplifying the accounting responsibilities of the very smallest businesses.
European legislators passed a new directive which recommends that so-called micro-businesses should be exempted from certain accounting requirements. So what has the EU decided, and how does it affect you?
What has the EU decided?
As part of a drive to reduce the perceived accounting burden on small businesses, the EU has issued a new directive exempting the very smallest firms from certain requirements.
The directive affects so-called ‘micro businesses’ – a term tat has been in use for a few years, but which has only recently received a legal definition. The EU considers a micro business to be a firm that fulfils at least two of the following three criteria:
• Net annual turnover below €700,000
• A balance sheet total below €350,000
• An average number of employees not exceeding 10
The directive recommends that these firms should not be subject to the full accounting responsibilities placed on larger businesses. Instead, they should be allowed to submit simplified returns – thus, the logic goes, easing the paperwork burden.
What has the British government decided?
The directive is not binding on member states. This means that individual national governments have a choice regarding whether or not they adopt it.
The British government has indicated that it intends to ease accounting obligations for small businesses, and it therefore seems likely that the directive will be adopted.
What should I expect?
If the government intends to adopt the exemptions, it seems likely that they announce their plans in the forthcoming Budget, due next month. It is expected that new rules will allow micro businesses to submit a simplified annual return. In addition, the current requirement for a profit and loss account would be replaced with a requirement for a more concise Trading Statement. In addition, micro businesses may be required to submit a Statement of Position, detailing things like assets, cash, loans, and creditors.
You should remember, however, that the directive has not yet been adopted - and you must therefore continue to keep your accounts and submit your returns as normal.
Check back soon for more coverage of the forthcoming Budget announcement.