2022 – Plans to ease accounting rules for UK small businesses increase risks of white collar crime | Business

The government has been accused of reducing efforts to tackle white-collar crime after it made proposals that could reduce transparency in small business accounts.

She said she was reviewing the type of reporting burdens faced by Britain’s smallest companies, hoping to reduce the cost and time involved in preparing public accounts to a level of detail that she claimed was “only available to large accounts”.

The Economy Ministry said the requirements, which were originally part of EU rules, diverted companies from focusing on growth and job creation.

“This will help British businesses grow while boosting investment as we use the freedoms of Brexit to regulate in a more proportional and flexible way that we work with British businesses,” she said.

But critics said the government is exaggerating the burden on businesses and that the proposals risk undermining efforts to tackle white-collar crime, as small businesses have been at the center of a series of scandals involving money laundering, fraud and tax evasion.

“What do we find when you look at the many money laundering scandals? I used a lot of small businesses and small businesses for this,” said Lord Prem Seka, emeritus professor of accounting at the University of Essex and the University of Sheffield.

“Many are involved in PPE [personal protective equipment] Scandals..and many small businesses are used as umbrella companies to circumvent labor laws, evade taxes and avoid Social Security payments,” he said, referring to companies that recruitment agencies and companies use to cover temporary labor costs, which are usually counted as fees paid to workers instead.

The corporate problem costs workers and the government up to £4.5 billion a year in fraud and embezzlement, according to government-recognised estimates.

Sekka explained that many small businesses are already compiling numbers that are published in the business accounts of lenders and tax officers at HMRC. He claimed that reducing the reporting burden would not lead to cost savings.

“In order to combat illicit financial flows, tax evasion and rights abuse, we need transparency. And when the government resists, it does not take seriously any of the other allegations it makes about white-collar crime.” “In fact, it is a private goal of the government.”

The government’s proposals will mean a revision of the definition of a small business, which means that more companies can be excused from publishing detailed accounts. It will also study the nature of the reporting requirements for so-called public interest entities – including listed companies, banks, building societies and insurance companies – to try to attract high-growth business.

The review will also look at whether there are “unnecessary restrictions” on the salaries of equity board members.

“Improving transparency for large companies while reducing unnecessary reporting burdens for small businesses is the right direction,” said Martin McTag, President of the Federation of Small Businesses (FSB).

However, with the relaxation of the rules for small businesses, larger companies can increase their exam requirements. As part of the same announcement, the government confirmed lengthy plans to introduce a new audit regulator that would have expanded powers to cover larger companies.

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The government has come under pressure to speed up reforms in the audit sector after the failures of a number of companies – including Thomas Cook, BHS and Carillion – which were partly blamed on audit weaknesses.

Ministers plan to replace the Financial Reporting Council with a new regulator, the Audit, Reporting and Governance Authority (ARGA), and expand the number of regulated firms, including unlisted firms with more than £750m in annual sales.

ARGA will also be given the power to investigate and sanction directors of large companies for breaching their reporting and auditing obligations.