By Shannon Power, 1st November 2023
In the dynamic landscape of business regulations, keeping up-to-date with the latest changes is crucial, especially for small and micro-sized companies that form the backbone of our economy. Recently, there have been discussions about revising the audit exemption rules, sparking conversations within the business community. The proposed changes, brought forward by Fianna Fáil minister Dara Calleary, aim to strike a balance between compliance and the financial well-being of smaller enterprises.
Importance of Timely Annual Returns
Before delving into the proposed alterations to the audit exemption rules, it’s crucial to underscore the significance of adhering to the on-time filing of annual returns as dictated by company law. Timely submission of financial information ensures legal compliance and protects stakeholders, including company members, employees, and third parties engaged in business activities with the company.
Understanding the Current Audit Exemption Rules
An audit exemption, as many small businesses are aware, serves as a financial reprieve. It saves smaller companies from the substantial expenses associated with a full annual audit. To qualify for this exemption, a company must meet two out of three specific criteria. These criteria include having a balance sheet total not exceeding €6 million, a turnover not exceeding €12 million, or employing fewer than 50 individuals.
Proposed Changes: A Graduated Regime
Minister Dara Calleary’s proposed changes introduce a two-step, graduated regime. Under this framework, a small or micro-sized company that is late in filing its annual return will not automatically lose its audit exemption. Instead, it will incur a late filing fee, allowing businesses to rectify their oversight without facing immediate financial strain.
However, suppose the company is late in filing its returns again within five years of the initial delay. In that case, it will incur a late filing fee and be required to submit audited accounts for the subsequent two-year period. This approach provides businesses with a second opportunity to rectify their compliance issues and maintain their audit exemption status.
Consultation and Rationale
These proposed changes stem from a comprehensive public consultation held earlier this year, where stakeholders were invited to share their views on enhancing the Companies Act 2014. The modifications aim to address concerns raised by the business community while ensuring that the financial integrity of companies is not compromised.
Impact on Small and Micro Businesses
The importance of these changes cannot be overstated, especially in light of the rising late filing fees. In 2022 alone, 15,358 companies paid late filing fees, averaging at €514 per company, totalling nearly €8 million. The proposed audit exemption alterations will alleviate the burden on these businesses, eliminating the need to pay for an expensive audit, which can run into thousands of euros.
Empowering Small Businesses for a Stronger Future
In summary, the proposed two-step, graduated audit exemption regime demonstrates the government’s commitment to supporting the small and micro-sized businesses that form the backbone of our economy. By allowing these enterprises a fair chance to rectify their compliance issues without immediate punitive measures, the proposed changes strike a balance between accountability and financial sustainability.
If you have any queries regarding the above or Audit Exemption in general, please do not hesitate to contact the Company Bureau team! Give us a call at +353(0)1 6461625 or fill out our online contact form.
Disclaimer This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.