The European Parliament is this week scheduled to vote on whether Member States should be able to exempt micro businesses from the requirements of the current EU financial reporting regime. The ICAEW supports the proposal, suggesting the debate and decision over micros' reporting requirements should take place at a national level.
Members of the European Parliament will in a plenary session on Thursday 25 February decide whether to give their seal of approval to the European Commission's proposal to exempt micro businesses (less than 10 employees) from the reporting requirements set out, since1978, in the Fourth Directive, as reflected in the UK in the 2006 Companies Act.
Dr Nigel Sleigh-Johnson, Head of the ICAEW Financial Reporting Faculty, commented:
"We believe that there is a good case for exempting micro businesses from the full rigours of the current EU financial reporting regime. We are keen advocates of simplification, based on a rigorous analysis of costs and benefits, and believe that this could prove an important step towards a more appropriate reporting regime for the smallest businesses.
"The option to exempt micro businesses would provide much-needed flexibility for Member States to inaugurate a comprehensive debate at a national level about the most appropriate financial reporting regime. It would allow reporting requirements to be better tailored to meet national tax and other legal requirements, which vary considerably between Member States.
"There is no need for uniform laws across the EU on this issue. It is important to be clear, however, that this would not mean that micro businesses would not have to provide any financial reports at all but rather that Member States would be given an opportunity to create their own financial reporting regime for these businesses."
The final decision at EU level on whether to exempt micro businesses will be taken by the European Council.
If the decision is positive, any change to UK requirements will require changes to UK law and standards, and the ICAEW will consult extensively with its members and other stakeholders to determine what changes would be appropriate in the UK environment.
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