Red tape slashed as 'small' company status is extended to those with 500 employees
From today (3 October), a starting assumption of a small business is deemed to be one that has fewer than 500 employees, rather than the 50 it has been.
The government also intends to consider extending the threshold to businesses with 1,000 employees once the impact of the current extension has been reviewed.
The change was announced yesterday (2 October) during the Conservative Party Conference by Prime Minister Liz Truss. She said the change would exempt some 40,000 companies from reporting requirements and other restrictions.
Some fear it will make it easier for more companies to hide more details about themselves, especially their financial condition. Small businesses are exempt from many regulations that apply to larger companies, particularly regarding their financial reporting.
However, many medium sized businesses with between 50 and 249 employees report that they are spending more than 22 staff days a month on average dealing with regulation. According to the department for Business, Energy & Industrial Strategy's Business Perceptions Survey in 2020, more than half of all businesses consider regulations to be a burden.
The exemptions are intended to be applied in a proportionate way so they do not impinge on workers’ rights or reduce the impact of standards relating to health & safety and product quality.
The changed threshold will apply to all new regulations under development as well as regulations under current and future review, including retained EU laws.
The government says the move is the first step in a package of reforms to ensure UK business regulation works for the benefit of the UK economy. Environmentalists, human rights campaigners and unions are concerned the changes will be at the expense of human rights and the environment.
At the same time, the Economic Crime & Corporate Transparency Bill currently before Parliament is intended to make it harder to launder money through bogus UK companies. It aims to strengthen the powers of Companies House to investigate directors' identities and stop companies being used as a front for crime or foreign kleptocrats.
The reforms to Companies House proposed in the Bill will see its biggest changes in 170 years. It is intended to arm Companies House with new powers to check, challenge and decline incorrect or fraudulent information, making it a more active gatekeeper over company creation.
The investigation and enforcement powers of Companies House will be strengthened, enabling it to cross check data with public and private partners, as well as reporting suspicious activity to security and law enforcement agencies.
The Bill also aims to help prevent the abuse of limited partnerships – including those registered in Scotland for money laundering and other nefarious purposes – by tightening registration and transparency requirements for these entities.
The government says law-abiding businesses and investors across the UK will benefit from simplified filing requirements and a more reliable companies register to inform business and lending decisions. The reforms proposed are being presented as protecting small business owners, consumers and the public from fraudulent use of their identities and addresses.
Business Secretary Jacob Rees-Mogg says: "We want the UK to be the best place in the world to invest and start a business, but we must not allow this openness to be exploited by fraudsters misusing the identities of innocent people, or corrupt elites attempting to disguise their dodgy dealings."