Accountants see red over business legislation burden

THE European Commission (EC) is being strongly urged to ease the burden of red tape on small business.

The Institute of Chartered Accountants in England and Wales (ICAEW) wants the EC to reduce the regulatory burden on small and medium enterprises (SMEs) as part of its initiative to modernise European SME policy.

In its response to consultation on the EC’s Small Business Act for Europe, the ICAEW warned that a “one-size-fits-all” approach to business created a disproportionate burden on SMEs.

It is calling on the commission to consider a more coherent exemptions policy particularly for micro-businesses, which are more likely to struggle to cope with the cumulative impact of regulation.

Keith Daniels, president of Sheffield & District Society of Chartered Accountants, said that although he welcomed the Commission’s initiative, consistency and common sense was needed.

“We agree that a fresh approach to SME policy across Europe is needed. But it should be framed by a coherent set of principles throughout the policy cycle, from conception to definition, implementation to evaluation.

“Any future legislation should be based on evidence, focused on incomes, simply communicated and easily applicable.”

Also high on the ICAEW’s wish list are measures to reduce the huge administrative burdens for small businesses. The appeal comes as the total annual cost to business of implementing new legislation stands at £10.2bn in the UK alone, according to an ICAEW Enterprise Survey.

As a result, it has asked for a review of the administrative burdens on SMEs, particularly the collective impact of employment law (singled out as the biggest administrative burden by respondents), health and safety legislation and VAT.

The ICAEW also believes that there should be a consistent, standard, definition of SMEs as the term captures a vast array of enterprises with widely differing needs. Problems affecting micro-businesses will often be significantly different from those relating to medium-sized enterprises.

In addition, the Institute has recommended the introduction of a “micro test”, which takes account of the needs of the majority of Europe’s businesses such as greater promotion of entrepreneurship, recognition of the importance of business support for SMEs and the primary role of the private sector in delivering such advice.

“In order to be a positive impact on the everyday life of businesses, European and national governments must implement a modernised approach to SMEs across all relevant policy areas. At the moment this is just not happening,” said Mr Daniels.

The ICAEW will be meeting UK government and EC officials to discuss its recommendations before the proposals are finalised by the end of June.