From April 2025, new regulations increasing company size thresholds and removing certain requirements from the Directors’ report will be effective.
The uplift is part of a drive to cut complexity and reduce the reporting burden on companies. It accounts for the impact of inflation since the thresholds were set in 2013. Unfortunately there will be limited impact of these changes for charities: Charities will still be required to report under FRS 102, and therefore even if they fall under the thresholds of the micro entity regime they will not be able to take advantage of the reductions in disclosure. In addition there is no current proposal to move the charity audit threshold upwards, although the ICAEW appealed in March 2024 to the Minister for Civil Society for this to be reviewed.
However, company subsidiaries within small charitable groups may be able to take advantage the audit exemption available to small entities, where the charitable group is now defined as small within the revised limits.
A transitional provision is included in respect of these amendments. The effect is that when considering qualification as a particular company size by reference to a previous financial year, the amendments made by these regulations are treated as having applied in those previous years.
As a result companies and LLPs can benefit from the new thresholds as soon as possible after the legislation comes into force.
New thresholds
The table below sets out the new size thresholds that will apply for a financial year if any two of the three criteria are met.
Changes to the Directors’ report requirements
Large and medium sized entities will no longer have to include in their directors’ report information on:
- financial instruments
- important events that have occurred since the end of the financial year
- likely future developments
- research and development
- branches outside the UK
- the employment of disabled people (this requirement is also being removed for small entities)
- engagement with employees
- engagement with customers and suppliers.
However, this again will have limited impact on charities who will continue to have to apply the SORP. And for large and medium charities, many of these directors’ report requirements overlap with requirements of the strategic report and section 172 statements, so may not reduce disclosure significantly.
Read the latest Charities and Non-profit newsletter to find out more about further changes that will impact the sector.
If you would like to discuss how these changes might affect you, please get in touch with our team.
This article was correct at the time of publishing.
