Government slashes red tape for thousands of businesses

Business secretary Jacob Rees-Mogg simplifies regulations for thousands of businesses, raises threshold for employee numbers from 250 to 500

The Government has loosened reporting requirements and other regulations for thousands of small business owners, which it says will free 40,000 businesses from red tape.

From today, the threshold for larger SMEs to be exempt from certain requirements for the way companies file accounts and other regulations has been raised from firms with under 50 employees to those with 500 or fewer.

Many businesses previously defined as medium-sized – those with between 50 and 249 employees – have told the Government they are spending over 22 staff days per month on average dealing with regulation, and over half of all businesses consider regulation to be a burden to their operation.

>See also: Mini Budget – what it means for small businesses

The Government also wants to address what has been called “threshold-itis”, whereby businesses deliberately slow their growth as they reach the 250-employee threshold to avoid falling into more paperwork.

Sceptics say that rather than fiddling around on the edges, the Government should get on and address more pressing issues such as business rates reform, re-joining the Single Market and Brexit-triggered shortages of workers.

Pointless red tape

Flagging the move as just the start of reforms to stimulate growth, business secretary Jacob Rees-Mogg, said: “Our enterprising medium-sized businesses are being buried in pointless paperwork, preventing them from reaching their world-leading potential.”

One sector that could benefit are care home employers, which often employ 200-300 people.

>See also: What the off-payroll U-turn means if you’re self-employed

However, according to the Times, the actual number of businesses which will benefit from looser financial reporting requirements will be closer to 4,000 companies with between 250 and 500 employees. This is because those that are classed as SMEs, employing fewer than 250 people, are already exempt from these reporting requirements.

Indeed, out of the 5.6m businesses in the UK, only 7,655, categorised as “large”, have more than 250 employees.

Another issue is that by redefining what is meant by a small business, the UK is now misaligned with the rest of Europe, which uses 250-employee definition. This would make small business performance comparisons with other countries problematic.

The European Union recently reviewed the definition of SME and decided to stick to the status quo.

The Government said it would also look at plans to consult on extending the threshold to businesses with 1,000 employees, once it has taken stock of the impact of the changes.

Further reading

What the economic crisis means for small businesses

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...

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