Consultation on modernising corporate reporting

A new consultation that proposes loosening the rules on company reporting standards could both benefit companies and give cause for concern.

The consultation, 'Modernising Corporate Reporting to support long-term economic growth', proposes reforming the corporate reporting framework. Proposals include extending the audit exemption to some medium-sized companies, replacing the current distributable profits regime with a solvency-based approach and tightening micro-entity reporting.

The wholesale review of the corporate reporting framework is intended, says the government, to support economic growth and strengthen the UK's international competitiveness. 

The government has built the consultation around five key principles: 

• Clarity of purpose: the purpose of the annual report and accounts should be to provide financially material and decision-useful information to investors and creditors. 
• Flexibility and trust: companies should be trusted to tell their own business story and tailor disclosures to the needs of investors and creditors. 
• Simplicity and coherence: reporting requirements should not be duplicated across company law, accounting standards and regulatory rules. 
• Proportionality: reporting requirements should reflect company size, ownership structure and economic impact, ensuring costs are justified by benefits. 
• Fit for the future: the government wants the UK’s legal framework to support business for the next decade and beyond. 

The central proposals for consultation include clarifying who the annual report and accounts are for by reaffirming that they are a document primarily intended for investors and creditors. 

Streamlining and simplifying

The proposals intend to simplify which companies are required to report different types of information and create a lighter regulatory load for Small and Medium-sized Enterprises (SMEs).

Some of the proposals include streamlining the range of accounting standards available for use by UK companies to four main standards and allowing certain medium-sized companies to qualify for an audit exemption, which could be extended to give reporting exemptions to smaller companies.

The proposal places a greater emphasis on self-regulation, something that might concern consumers and businesses.

For example, the consultation proposes replacing the 'true and fair presumption' for micro-entities with an obligation to prepare accounts that comply with ‘micro-entity standards’ and introduce a new voluntary assurance standard, pitched at a level designed to give lenders confidence in SME accounts. 

The government wants to create a streamlined legislative framework that moves detailed requirements out of the law and into relevant standards, including making the financial reporting law clearer and more coherent.  

Other proposals include:

• Moving corporate governance reporting from company to group level and removing or simplifying certain remuneration reporting requirements. 
• Replace the complex rules on distributable profits and capital maintenance with a solvency-based regime.  
• Proposals would require companies to make a statement that the dividend will not affect the company's ability to continue as a going concern. 
• Simplify remuneration and corporate governance reporting.  
• Embrace digital communications.  

The government has said that any relevant changes may also apply to Limited Liability Partnerships (LLPs). 

The consultation closes on 30 November 2026. The full consultation details and questions can be found here:

https://www.gov.uk/government/consultations/modernising-corporate-reporting