'Small' company definition extended to 40,000 more businesses

This measure was introduced by Liz Truss, it seems to have been shelved.

The government is changing the definition of a 'small' company by increasing the employee number threshold from 50 to 500 employees. This change will bring some 40,000 businesses within the definition of 'small' and will have some considerable implications across accounting, tax, investor reliefs and grants.

• Small businesses benefit from many exemptions and reliefs.
• The previous small company Threshold, as set by the EU, was limited to those businesses with fewer than 50 employees. In addition, either the turnover or Balance Sheet total must be €10 million or less.
• From 3 October 2022, the employee threshold will depart from that imposed by the EU and will now include businesses with fewer than 500 employees for future and reviewed regulations.
• There are future plans to extend this further to 1,000 employees.
• The current EU definition of a medium-sized business is one with fewer than 250 employees.
• The intention is to apply these new extensions proportionately. The new policy can be overridden where necessary to ensure that certain rights and standards, such as workers' rights, are still maintained.
• It is currently unclear how this new threshold will interact with current tax reliefs and exemptions and existing Accounts reporting and Audit regulations and changes to small company reporting proposed by the government's new Economic Crime Bill including special measures to ensure transparency in small and micro company accounts.

Useful guides on this topic

What is a small or medium-sized company?
What is an SME? What size is a small company under the Companies Act? What size is a micro company? What is a small company under EU law? Different criteria are used for determining whether a company ...

Small company accounts: Companies House requirements
In 2016 filing obligations for small and micro-entities changed following the withdrawal of the FRSSE and the introduction of new reporting standards FRS101, FRS102 and FRS105. 

Audit thresholds
What are the audit thresholds? Which entities are exempt from audit?

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