The smallest businesses are set to receive a red tape reduction following a decision in Brussels.
Business ministers met on Monday to discuss accounting regulations, and agreed that very small firms should enjoy a range of reporting exemptions.
So-called ‘micro-entities’ will enjoy the right to file simplified profit and loss accounts and balance sheets, provided that individual member states agree.
In order to qualify as a micro-entity, a business must not exceed two of the following three criteria: an average of 10 employees during the relevant financial year; a balance sheet total of €250,000 (£217,000); and a net turnover of €500,000 (£434,000).
Welcoming the move, which will enter the statute books provided that the European Parliament agrees, business minister Ed Davey said the new rules could save UK businesses £300 million a year.
But some commentators have suggested that the impact could be minimal, with firms already having to compile more extensive accounts when they reach the VAT registration threshold of £73,000 – well below the new £434,000 limit.