black android smartphone on top of white book

Raising Audit Threshold Could Save Yorkshire Firms £8.6 Million

The audit exemption threshold for turnover has not risen in line with inflation during the past six years, leaving almost 8,000 UK companies with unnecessary compliance costs estimated at more than £120 million.

The current audit exemption threshold for turnover is £10.2 million, as of 1 January 2016. According to the latest Retail Price Index (RPI), published monthly by the Office for National Statistics (ONS), this would be £14 million today.

Companies House lists a total of 7,975 registered companies in the UK with a turnover between £10m-£14m that would be exempt from audit costs if the threshold had kept up with the RPI. Of these, 577 are based across Yorkshire and any change to the level would unlock funds to be used elsewhere.

This analysis comes as thousands of UK businesses brace for recession amid soaring inflation, rising interest rates, and crippling energy bills.

Donald Boyd, Partner at Azets UK, said: “By freezing the audit exemption threshold for turnover, even more pressure is being heaped on UK businesses, many of which are fighting just to keep the lights on.”

“My conservative estimate is that an additional £120 million of extra audit fees would not have been required if the audit exemption threshold had risen in line with inflation.”

“It is our job to support and champion British businesses, particularly through periods of economic crisis. We do not want to take unnecessary audit fees.”

Meanwhile, the UK audit industry is under fire due to a talent shortage and persistent audit failures among larger accounting firms, compounded by this unnecessary number of companies that require an audit.”

Donald Boyd added: “This is not just about businesses paying unnecessarily. Audit firms can ill afford to welcome unwarranted pressure at a time of significant challenges in the industry.”

“8,000 companies have required an audit purely due to the freezing of the audit turnover threshold. Put another way, that’s 48,000 annual audits over six years that otherwise would not have been required, relieving some of the burden on overloaded audit firms.”

Taking the figures purely for Yorkshire and it is estimated that with 577 businesses generating turnover in the region £10-14 million, fees in the region of £8.6 million would be saved annually if the audit threshold was to be increased in line with inflation.