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New government proposals ‘will facilitate economic crime’

New government proposals ‘will facilitate economic crime’

Government proposals to reduce transparency around small company accounts will lead to an increase in economic crime including money laundering, according to a leading academic.
A Whitehall review of SMEs’ reporting responsibilities proposed reducing the cost of having to produce accounts to a level “only needed for larger companies”, it said. However, critics say this risks weakening efforts to combat economic crime, since small firms can often also be connected to instances of money laundering, fraud and tax evasion.
Lord Prem Sikka, emeritus professor of accounting at the University of Essex and the University of Sheffield, criticised the proposal. He said: “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.
“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.
On top of that, many small companies already compile the figures that are published in company accounts for lenders and tax officials at HMRC, so reducing the reporting burden will not result in cost savings, he said.