The Government is currently consulting on proposed changes to the UK’s non-financial reporting regime, which aim to reduce the burden on medium-sized companies.
A company qualifies as “medium-sized” in a financial year if it meets at least two of the following three criteria:
a. Annual turnover exceeding £10.2m but not more than £36m.
b. Balance sheet total exceeding £5.1m but not more than £18m.
c. Average number of employees exceeding 50 but not more than 250.
Medium-sized companies must currently prepare full, unabridged financial statements, a directors’ report, and a separate strategic report. Although less detailed than those for large companies, the strategic report must still provide a fair review of the company’s business, an analysis of its development and performance, and a description of its principal risks and uncertainties.
In March, the Government proposed raising the upper turnover and balance sheet thresholds to £54m and £27m, respectively, alongside increases for other company size categories (micro, small, and large).
The Government is now considering two additional changes:
a. Increasing the Employee Headcount Threshold
The threshold for medium-sized companies would increase from 250 to 500 employees. This change would reclassify approximately 2,000 companies from large to medium-sized, in addition to those affected by the financial threshold changes.
b. Eliminating the Requirement for a Strategic Report
Given that investors reportedly do not significantly use strategic reports from medium-sized private companies, the Government proposes abolishing this requirement. However, it would remain for public companies and public interest entities (PIEs). This change could benefit between 41,000 and 43,000 companies.
Additionally, the Government plans to remove certain content requirements from the directors’ report for companies of all sizes. These include reporting on engagement with employees, suppliers, and customers, R&D activities, and likely future developments.
Responses to the consultation are requested by 27 June 2024.
Author
Gill Laing is a qualified Legal Researcher & Analyst with niche specialisms in Law, Tax, Human Resources, Immigration & Employment Law.
Gill is a Multiple Business Owner and the Managing Director of Prof Services - a Marketing Agency for the Professional Services Sector.
