Navigating the Expanding Horizons: UK Company Size Thresholds on the Rise

Financial reporting
One of the most significant implications of your company size is the impact this has on your financial reporting obligations.  The obligations placed on very small companies (called “micro organisations” in the jargon) are much less than those required by larger companies.  Financial statements for the largest companies are more extensive, providing stakeholders (not just shareholders) with deeper insights into their operations, financial health and risk exposure.

For companies looking to grow it is always wise to have an eye on what might be required in the future, the age old adage applies here as much as it ever did; “By failing to prepare, you are preparing to fail”.

Compliance Requirements
With increased size thresholds come more compliance obligations. Larger companies must navigate a more complex regulatory landscape, encompassing areas such as corporate governance, auditing standards, and disclosure requirements. Ensuring compliance not only mitigates the risk of penalties but also fosters transparency and investor confidence.

Access to Incentives and Support Schemes
Its not all bad news though, meeting higher size thresholds can also unlock access to various incentives, support schemes, and funding opportunities. Many government initiatives target larger enterprises, aiming to stimulate innovation, job creation, and economic growth. By understanding and leveraging these schemes, businesses can capitalize on available resources to fuel their expansion and development efforts.

So what is changing?
UK Prime Minister Rishi Sunak announced that the company size thresholds will change, as part of a package of measures designed to ease the UKs regulatory burden, particularly in relation to “non-financial” reporting.  The intention is that the new thresholds will be effective for financial periods starting on or after 1 October 2024.  Watch this space, we will keep you informed as we get nearer to this date.

If the new measures announced are adopted micro entity thresholds will move from not more than £632,000 revenue to not more than £1m.  Small companies will increase to not more than £15m revenue, and the medium threshold to not more than £54m.  Everything above £54m would be considered a large company.

The balance sheet measures are similarly increasing to not more than £500,000. £7.5m and £27m respectively.

This is just the start, with further consultation announced on further details such as potentially exempting medium-sized companies from being required to include a strategic report in their financial statements and taking smaller public interest entities out of audit tendering and rotation requirements for auditors.

And what do we think?
We think this is a positive step, streamlining the reporting regime in the UK, and removing unnecessary complications from your life and allowing us to open conversations with you as to what level of reporting and compliance oversight you want rather than need for your business.

To discuss the above please contact Joe Diston or Ann Bibby in the first instance.