European Union lawmakers have voted in favour of exempting the smallest businesses from drawing up annual accounts.
The proposed exemption would apply to ‘micro enterprises’ that met two of three criteria: a balance sheet worth less than €500,000; net turnover under €1m; and an average of 10 employees or less during the financial year.
However, the plan would allow individual EU countries to decide whether to grant the exemption or not and firms would still have to keep records of their business transactions and financial situation.
While MEPs have backed the plans, they still require approval from member states.
UEAPME, a European SME group, described the vote as a "step back for the internal market" that could "decrease transparency and create an uneven playing field between businesses operating in different member states".
The group also poured scorn on the suggestion that the move could reduce the red tape burden on small businesses since qualifying firms would still have to file accounts for national administrations, banks, suppliers and customers.
UK business minister Ian Lucas, however, said that the UK was in favour of the plan: "Making life simpler by cutting costs and saving time is a vital step to helping the very smallest businesses, especially in the current economic climate. The UK has supported the European Commission in this simplification of regulation for micros right from the start. We look forward to further progress on this initiative."
An estimated 75% of companies in the European Union fall into the ‘micro-entity’ category. They are usually small businesses operating in a small region with no activity in other EU nations.
© Crimson Business Ltd. 2010