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New accountancy rules on leasing may hit small firms

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Many thousands of smaller businesses could see an increase in their administrative burdens if new accounting rules on leasing come into effect, it has been claimed.

Proposals set out in a discussion paper by the International Accountancy Standards Board would mean that all leased equipment – including cars, commercial vehicles, machinery, PCs and photocopiers – be added to firms’ balance sheets, even by the smallest businesses, the Finance and Leasing Association (FLA) has argued.

This would have an impact on up to 400,000 SMEs across the UK, the FLA said, the number that both lease equipment and must prepare financial accounts.

The FLA, jointly with the Forum of Private Business (FPB), has urged that a more sensible approach be adopted, one that takes account of the costs and benefits to small businesses of including all leased equipment on their balance sheets.

The two business groups want to see an optional, simplified procedure that should be available for all but the largest leases.

Stephen Sklaroff, the director general of the FLA, said: “We are not against leased equipment appearing on balance sheets. But the standard-setters need to follow the European Commission’s advice to ‘Think Small First’ and consider whether the compliance regime is too onerous for small businesses.

“Surely, we should differentiate between large corporates with millions of pounds of leased equipment and small businesses that rent a fax machine and a photocopier? Britain’s businesses will be the catalyst to economic recovery, so we need to give them all the help we can.”

Phil Orford, chief executive of the FPB, added: “Leasing is often an effective method of controlling costs, so it would be disappointing if complying with the new rules were made more time-consuming and expensive.

“Setting a requirement for businesses of all sizes to add leased equipment to their balance sheets would be to ignore issues of scale at a time when small business owners are most in need of a proportional approach.”