London Daily

Focus on the big picture.
Friday, Sep 12, 2025

Plans to relax accounting rules for small UK firms ‘risks rise in economic crime’

Plans to relax accounting rules for small UK firms ‘risks rise in economic crime’

Critics say proposals ‘an own goal’ for government in combating money laundering, tax evasion and fraud
The government has been accused of watering down efforts to combat economic crime after putting forward proposals that could reduce transparency around small company accounts.

It said it was reviewing the kind of reporting burdens faced by the UK’s smallest businesses in the hope of reducing the cost and time required to produce public accounts to a level of detail that it claimed was “only needed for larger companies”.

The business department said those requirements, which it said were originally part of EU rules, were distracting firms from focusing on growth and creating jobs.

“This will help the UK’s companies grow whilst bolstering investment, as we take advantage of Brexit freedoms to regulate in a more proportionate and agile way that works for British businesses,” it said.

However, critics said the government was exaggerating the burden on firms, and that the proposals risked weakening efforts to combat economic crime, given that small firms have been at the heart of a number of money laundering, fraud and tax evasion scandals.

“When you look at many of the scandals involving money laundering, what do we find? Lots of small businesses, small companies, used for that purpose,” said Lord Prem Sikka, emeritus professor of accounting at the University of Essex and the University of Sheffield.

“Many are implicated in PPE [personal protective equipment] scandals … and many small companies are used as umbrella companies, to evade employment law, evade tax, and not pay national insurance,” he added, referring to firms used by recruitment agencies and companies to cut temporary payroll costs, which are usually charged as fees to the workers instead.

The problem posed by umbrella companies costs workers and the government as much as £4.5bn a year in fraud and misappropriation, according to estimates recognised by the government.

Sikka explained that many small companies already compile the figures that are published in company accounts for lenders and tax officials at HMRC. He claimed that reducing the reporting burden would not result in cost savings.

“To fight illicit financial flows, tax avoidance and abuse of law, we need transparency. If the government are opposing that, they are not serious about any of the other claims they are making about fighting economic crime,” Sikka added. “It’s an own goal by the government, really.”

The government’s proposals will mean reviewing the definition of a micro-company, meaning more companies could be exempt from releasing detailed accounts. It will also consider the kind of reporting requirements for so-called public interest entities – which cover companies listed on the stock exchange, banks and building societies, and insurance firms – to try to attract high-growth firms.

The review will also consider whether there are “unnecessary restrictions” on paying directors in shares.

“Improving transparency at big corporates whilst easing unnecessary reporting burdens for small businesses is the right direction of travel,” said the Federation of Small Businesses (FSB) chair, Martin McTague.

But as rules for small businesses are relaxed, larger firms could see their audit requirements increase. As part of the same announcement, the government confirmed long-trailed plans to launch a new audit regulator that would have extended powers over larger firms.

The government has come under pressure to speed up reforms of the audit sector, after a series of company failures – including Thomas Cook, BHS and Carillion – that have been partly blamed on auditing shortcomings.

Ministers plan to replace the Financial Reporting Council with a new regulator, the Audit, Reporting and Governance Authority (ARGA), and expand the number of businesses who come under the regulator, including unlisted companies with more than 750 employees and a greater than £750m annual turnover.

ARGA will also be given powers to investigate and fine directors of large companies if they breach their duties around corporate reporting and audit.
Newsletter

Related Articles

0:00
0:00
Close
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Turkish authorities seize leading broadcaster amid fraud and tax investigation
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
King Charles and Prince Harry Share First In-Person Moment in 19 Months
Starmer Establishes Economic ‘Budget Board’ to Centralise Policy and Rebuild Business Trust
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Brazilian police say ex-President Bolsonaro had planned to flee to Argentina seeking asylum
Trinidad Leader Applauds U.S. Naval Strike and Advocates Forceful Action Against Traffickers
Kim Jong Un Oversees Final Test of New High-Thrust Solid-Fuel Rocket Engine
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Supreme Court temporarily allows Trump to pause billions in foreign aid
Charlie Sheen says his father, Martin Sheen, turned him in to the police: 'The greatest betrayal possible'
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
Pig Heads Left Outside Multiple Paris Mosques in Outrage-Inducing Acts
Nvidia’s ‘Wow’ Factor Is Fading. The AI chip giant used to beat Wall Street expectations for earnings by a substantial margin. That trajectory is coming down to earth.
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
On the Anniversary of Queen Elizabeth’s Death: Prince Harry Returns to Britain
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Murdoch Family Finalises $3.3 Billion Succession Pact, Ensuring Eldest Son’s Leadership
Big Oil Slashes Jobs and Investments Amid Prolonged Low Crude Prices
Court Staff Cover Up Banksy Image of Judge Beating a Protester
Social Media Access Curtailed in Turkey After CHP Calls for Rallies Following Police Blockade of Istanbul Headquarters
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
Elon Musk Poised to Become First Trillionaire Under Ambitious Tesla Pay Plan
France, at an Impasse, Heads Toward Another Government Collapse
Burning the Minister’s House Helped Protesters to Win Justice: Prabowo Fires Finance Minister in Wake of Indonesia Protests
Brazil Braces for Fallout from Bolsonaro Trial by corrupted judge
The Country That Got Too Rich? Public Spending Dominates Norway Election
Nearly 40 Years Later: Nike Changes the Legendary Slogan Just Do It
Generations Born After 1939 Unlikely to Reach Age One Hundred, New Study Finds
End to a four-year manhunt in New Zealand: the father who abducted his children to the forests was killed, the three siblings were found
Germany Suspends Debt Rules, Funnels €500 Billion Toward Military and Proxy War Strategy
EU Prepares for War
BMW Eyes Growth in China with New All‑Electric Neue Klasse Lineup
Trump Threatens Retaliatory Tariffs After EU Imposes €2.95 Billion Fine on Google
Tesla Board Proposes Unprecedented One-Trillion-Dollar Performance Package for Elon Musk
US Justice Department Launches Criminal Mortgage-Fraud Probe into Federal Reserve Governor Lisa Cook
Escalating Drug Trafficking and Violence in Latin America: A Growing Crisis
US and Taiwanese Defence Officials Held Secret Talks in Alaska
Report: Secret SEAL Team 6 Mission in North Korea Ordered by Trump in 2019 Ended in Failure
×