Plans to relax accounting rules for small UK firms ‘risks rise in economic crime’

theguardian.com:

The government has been accused of watering down efforts to combat economic crime after putting forward proposals that could reduce transparency around small company accounts.

It said it was reviewing the kind of reporting burdens faced by the UK’s smallest businesses in the hope of reducing the cost and time required to produce public accounts to a level of detail that it claimed was “only needed for larger companies”.

The business department said those requirements, which it said were originally part of EU rules, were distracting firms from focusing on growth and creating jobs.

“This will help the UK’s companies grow whilst bolstering investment, as we take advantage of Brexit freedoms to regulate in a more proportionate and agile way that works for British businesses,” it said.

However, critics said the government was exaggerating the burden on firms, and that the proposals risked weakening efforts to combat economic crime, given that small firms have been at the heart of a number of money laundering, fraud and tax evasion scandals.

“When you look at many of the scandals involving money laundering, what do we find? Lots of small businesses, small companies, used for that purpose,” said Lord Prem Sikka, emeritus professor of accounting at the University of Essex and the University of Sheffield.

“Many are implicated in PPE [personal protective equipment] scandals … and many small companies are used as umbrella companies, to evade employment law, evade tax, and not pay national insurance,” he added, referring to firms used by recruitment agencies and companies to cut temporary payroll costs, which are usually charged as fees to the workers instead.

The problem posed by umbrella companies costs workers and the government as much