Company reporting thresholds to rise – the impact for academy trusts

29th Aug 2024

Early in 2024, the government announced that the company corporate reporting thresholds are to increase. The aim is to ease the regulatory burden for businesses on reporting. The intention is that these changes will take effect for accounting periods beginning on or after 1 October 2024.

If adopted, the new measures will see reporting thresholds for micro-entities increase from a turnover of £632,000 to £1 million with the balance sheet total increasing to £500,000 (up from £316,000).

For small businesses, the turnover threshold will increase from £10.2 million to £15 million with the balance sheet total threshold increasing to £7.5 million (up from £5.1 million).

For medium-sized businesses, reporting thresholds will start at £54 million (from £36 million) with the balance sheet total increasing to £27 million (up from £18 million). Everything above this threshold will be considered a large company.

What does this mean for academy trusts?

Well, firstly, academy trusts will be impacted by the threshold changes in the financial year ending 31 August 2026 onwards. The first accounting period for academy trusts on or after 1 October 2024 will be 1 September 2025.

Most academy trusts at present tend to fall in either the current medium or large size thresholds. Therefore, we will likely see several academy trusts fall into a medium or even small size threshold with these proposed changes.

Ultimately, this may lead to a change in narrative reporting, i.e., the Trustees’ Report which includes an academy trust’s strategic report. This report contains information relating to the academy trust’s business model, strategy and objectives, risks, performance and financial position to allow stakeholders to understand the business and how the trustees have performed their statutory duties. Medium-sized academy trusts that are re-defined as small under these proposals would be able to take exemption from preparing this report.

Be aware of the employee number threshold

At present, the proposed threshold changes are monetary ones only. There has been no mention of increasing the number of employees thresholds. Currently, these stand at less than 50 for small businesses, less than 250 for medium-sized businesses and more than 250 for large businesses.

Further changes to how businesses are classified by the number of employees may also be introduced, however. The Government launched a consultation prior to the election, and we await the outcome. This proposed to increase the medium-sized businesses’ threshold to 500 employees (up from 250).

This change could be significant for academy trusts. A number are currently obligated to comply with other business reporting regulations such as the gender pay gap report, which currently stands at 250. Whether the limit for this reporting will also increase or not remains to be seen.

As ever, academy trusts will have to follow the requirement of the Academies Accounts Direction which follows both the Companies Act and also charity SORP. Therefore, there is no guarantee these changes will see a lightening of administrative burden for academy trusts—but those responsible for compiling this information annually can only hope this will be the case.

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