Accountancy & Management: Scots seek rethink on framework for small businesses

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REPLACEMENT of the statutory audit for small businesses by an annual accountants' report would reduce the number of collapses in the sector, as more time could be devoted to survival and growth, according to the Institute of Chartered Accountants of Scotland.

Their discussion document Freeing Up Small Business Enterprise, published today, also calls for small companies to have greater flexibility in choosing the form of corporate structure that best suits them. In particular, disincorporation should be made easier.

This is needed, the institute says, because the commercial and fiscal environment has changed dramatically since the Sixties, when small businesses 'were well-advised to incorporate'. As a result many are now locked into an unsuitable legal and taxation structure. To reduce this burden, there must be 'a level playing field for the taxation of business profits and gains', making it easier for businesses to move between corporate structures.

Even small businesses for which limited liability is the most appropriate find they are governed by a legislative framework more suited to large corporates. 'In particular, time could . . . be put to better use by allowing the professional accountant to advise managers on how to run businesses more effectively.'

Primrose McCabe, a vice-president of the institute who chaired the working party, said the purpose of the document was 'to put forward our strong views on the need to make changes to the legislative and fiscal framework within which small companies operate, to allow that sector of the economy to flourish and expand.' Making small changes, such as altering the situation for companies under the pounds 36,600 VAT threshold, would 'have limited impact, though any step in this direction is to be welcomed'.