A bright future ahead for micro-business accounts?
There’s been an important announcement in Europe recently that could have a huge impact on the way that small businesses manage their accounts.
The EU’s financial and economic council has agreed a new directive that would allow member states to exempt very small companies from mainstream accounting and financial reporting obligations. Essentially, it would simplify the whole accounting process for micro-businesses and mean they don’t get bogged down with overly-complicated financial rules.
This new directive is part of a wider Europe-wide drive to ease administrative burdens on the continent’s smallest companies; and although it’s not yet been confirmed if - or how - this will be implemented in the UK, the signs are very positive. The Department for Business, Innovation & Skills (BIS) has been increasingly supportive of the prospect of simplifying rules for small businesses and it’s even been suggested that the Government could include such proposals as part its March Budget announcements.
If this is indeed the case, then it would be great news for the UK’s micro-enterprises, as they could be excused the need to publish full accounts when such reforms are enacted.
The reality is that many small business owners and freelancers currently find tax and accounts pretty terrified and they often end up leaving their bookkeeping or tax returns to the last minute because they feel bamboozled. Therefore simplifying the system would not only be a massive weight off their shoulders but it would also enable them to focus on the thing that’s most important to them: actually running their business.
In my experience, the UK's accounts and tax system is also so complicated that many lay people can find accounts confusing, let alone their tax return. There are too many intricacies to consider, and too much red tape and confusing jargon, so it can feel like you’re fighting a losing battle as you try to keep on top of your business bookkeeping.
If the UK implements the EU directive, however, it will mean that more than a million small businesses could be eligible to apply a simplified reporting regime for their accounts. That’s a seismic shift which will allow business owners to be in better charge of their finances and much more confident about their accounts and tax than ever before - and this can only be a positive step for the UK’s small business economy.
- How MTD will work for businesses with an accounting year that doesn't match the tax year
- Important news for contractors - changes to IR35
- New tax year: what has changed?
- New VAT flat rate scheme rate for certain businesses
- Why the first week of April is the best time to switch to a new accounting system