Simpler corporate reporting requirements planned

At a Regional Investment Summit in Birmingham on 21 October 2025, the Chancellor, Rachel Reeves, announced plans to scrap paperwork and cut red tape for thousands of UK businesses. These plans are part of a raft of changes which aim to save businesses almost £6 billion per year.

Simpler corporate reporting rules are planned in an attempt to reduce the amount of time spent on administration. This follows plans announced by the Prime Minister to achieve a 25% reduction in ‘pointless administration’. However, will accountants (particularly those in practice) agree that these measures will translate to cost-savings for companies?

It is estimated that the plans outlined in the Summit last week will see over 100,000 businesses qualify for simpler corporate reporting rules. Among other issues, the plans include:

• Increasing the size thresholds for corporate reporting and cutting duplicative requirements (there has already been an increase to the company size thresholds – see below).
• The government has estimated that up to 44,000 medium-sized private companies and around 7,000 subsidiary companies will no longer be required to produce strategic reports in their annual reports. This is likely to be very welcome for many businesses.
• Removing the requirement for any company to submit directors’ reports to Companies House.
• Digital verification of planning documents, to speed up approval for local projects.

Increase in company size thresholds

The company size thresholds have already been increased for accounting years commencing on or after 6 April 2025 as follows:

The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 (SI 2024/1303) include a transitional provision which allows preparers to treat the amendments as having been applied in the prior year when determining the size of the company or Limited Liability Partnership (LLP). This means the new thresholds are applied retrospectively to establish the size of the company or LLP. Consequently, companies and LLPs can take advantage of the increased size thresholds as soon as possible once the accounting year is within scope of the new thresholds.

For example, for a 31 December 2025 year end, assess the company size thresholds based on the old thresholds because that period started prior to 6 April 2025.

For a 31 December 2026 year end, assess the company size thresholds based on the new thresholds as this period starts after 6 April 2025. The company will qualify and may not require an audit under the new company size thresholds if the year ended 31 December 2026 qualifies as small under the new thresholds and the year ended 31 December 2025 qualifies as small under the new thresholds.

Also, the audit exemption thresholds track the small companies’ thresholds and there are no plans to de-couple the small companies’ thresholds and the audit exemption thresholds. Hence, as there is a change to the small companies’ thresholds, the audit exemption thresholds will automatically change as well.

Strategic reports and directors’ reports

It is expected that the repealing of a strategic report for medium-sized businesses will be very welcome. This report has often been criticised by professional bodies and regulators in terms of its technical content during reviews of financial statements, and many directors find producing a strategic report to be burdensome.

Strategic reports have also been criticised by certain users in the past for failing to ‘add value’ and which ‘create unnecessary burdens’.

There has already been amendments made to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (2008/410) through SI 2024/1303 as follows:

• Regulation 10 Directors’ report, para 2 has been amended to omit Part 3 disclosures relating to the employment, training and advancement of disabled persons. In addition, Part 4 disclosures have been removed which relate to the engagement by the company with employees, suppliers, customers and others.
• Schedule 7 of SI 2008/410 (matters to be dealt with in the directors’ report) has been amended to omit paras 6 and 7. Paragraph 6 relates to financial instruments disclosures (such as financial risk management objectives, exposure to price risk, credit risk, liquidity risk and cash flow risk etc); and para 7 contains disclosure requirements relating to:
  • post-balance sheet events;
  • future developments;
  • research and development activities; and
  • an indication as to the existence of branches of the company outside of the UK.
• Parts 3 and 4 of Schedule 7 to SI 2008/410 have also been removed:
  • Part 3 relates to the disclosures concerning employment of disabled persons.
  • Part 4 relates to the disclosures concerning engagement with employees, suppliers, customers and others.

These amendments have been made to the directors’ report to remove unnecessary overlap which should improve the conciseness of the directors’ report.

These amendments come into effect for accounting years commencing on or after 6 April 2025.

Are these reductions helpful?

While many accountants will welcome changes such as repealing a strategic report for certain companies and other narrative-related issues in the financial statements, there have already been critics of the plans. Some in the profession argue that the strategic report is a helpful document and should remain because it provides information that is helpful to users, such as future developments of the business and certain key performance indicators. They also argue that, to a certain extent, it holds directors to account on the performance of the business during the year.

On the other hand, those in favour of the proposals applaud removing the requirement for directors’ reports and strategic reports for small and medium-sized businesses arguing that they are pointless administrative burdens that for most private companies add little, if any, benefit to the annual report.

I suspect the majority of private businesses and accountants acting for those businesses will be welcoming these sorts of changes. However, are the plans to reduce red-tape for businesses realistic when you consider the additional work businesses will be carrying out in respect of the Companies House reforms, implementing the periodic review amendments to UK and Ireland accounting standards and – dare I say it – implementing Making Tax Digital?

Conclusion

There are benefits to be had in reducing administrative burdens on businesses, but some are arguing that the plans do not go far enough. Whether these planned changes will translate into the cost-savings estimated by the government will, of course, be confirmed (or otherwise) in the fullness of time.

Category: Accounting and standards