UK Construction and Law
Directors' reports go and some medium-sized companies escape audit as a corporate reporting consultation opens today
By Staff Writer | 7 September 2026
The Government says its next round of company reporting reform opens for consultation today and closes on 30 November. Medium-sized firms may qualify for audit exemption, the directors' report is to be scrapped, and the rules on distributable profits are to be replaced with a solvency test.
The announcement came from the Department for Business, Innovation, Science and Trade on Sunday 6 September 2026. It follows reforms the department says already save businesses more than 450 million pounds a year, and it puts further savings on the table before the consultation document itself has been published. The release states that the consultation opens on 7 September 2026 and closes for responses on 30 November 2026.
What is proposed
Five headings are given. The first clarifies who the annual report and accounts are for and creates a lighter regulatory load for small and medium-sized enterprises, including allowing some medium-sized companies to qualify for audit exemption. The second simplifies which companies must report which information, and tests the merits of non-financial reporting requirements for private companies. The third simplifies financial reporting, the strategic report and remuneration reporting, with corporate governance reporting to be flexible and proportionate. The fourth is the most technical: making financial reporting law clearer and replacing the rules on distributable profits and capital maintenance with a solvency-based regime. The fifth makes electronic communications to shareholders the default.
Separately, plans already under way to scrap directors' reports and expand exemptions from providing strategic reports are expected, on the department's figures, to save around 230 million pounds a year.
No-one goes into business to fill out forms. For years, hardworking firms in this country have been weighed down by pen-pushing paperwork and frustrating costs, ticking boxes that do nothing to help them grow their business.
Jonathan Reynolds, Secretary of State for Business, Innovation, Science and Trade
The length of the report
The department's argument rests partly on volume. It says the average annual report and accounts of some businesses now runs to 98,000 words, and that the FTSE 100 average is 152,000. It also describes small chains of cafes and hotels, and a furniture manufacturer, spending thousands of pounds on reports. The release does not define which medium-sized companies would qualify for the audit exemption, nor state the thresholds, and until the consultation document appears those remain open questions.
Why it matters on site
Construction is a supply chain of companies checking each other's accounts. A main contractor's credit assessment of a subcontractor, a client's pre-qualification of a tenderer and an adjudicator's view of a party's solvency all lean on what is filed at Companies House. If a medium-sized subcontractor no longer needs an audit, the figures in its filed accounts carry a different weight, and anyone relying on them will want to know it. The solvency-based regime for distributions is the other point to watch: it changes the legal test a board applies before paying a dividend, which is the question that arises when a contractor fails and the liquidator looks back at what was taken out.
The consultation runs until 30 November. Contractors and their advisers who want the audit threshold, the solvency test or the strategic report exemption drawn one way rather than another have twelve weeks to say so.