Dan Neidle

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An expanded version of this thread, with links to references and further background, is here: taxpolicy.org.uk/small-compan...

All we need to do is minimise cost for coffee shops and micro-businesses, but ensure adequate disclosure by the likes of PPE Medpro.

This is not very hard.

And companies that qualify for the exemption should be required to state their turnover and profit (but no other details from their P&L). That should all-but-eliminate compliance cost, but ensure that key financial information is made available.

The thresholds could (for example) be set at turnover of £1m, balance sheet of £1m and ten employees.

So here's our proposal: to qualify for exemption from filing full accounts, a company could be required to meet all of a turnover, balance sheet and employee condition.

It's time for a sensible compromise. Protect genuine small businesses from additional cost but make sure that £200m businesses always file

So it's easy to understand why there were reports in the press back in July that the Government may be about to scrap the changes. Nothing has happened yet - the regulations are still in place requiring full P&L to be filed by 2027.

There have also been concerns around cost. This is more persuasive, particularly for micro companies.

This has caused considerable disquiet for some businesses. There have been concerns about privacy. But companies managed this perfectly fine before 2006 - I'm unpersuaded.

The recent focus on anti-corruption measures prompted the last Government to pass the Economic Crime and Corporate Transparency Act. This requires that all companies have to file a profit and loss account from 2027.

The "two out of three" was a classic EEC/EU compromise from back in 1978 (when large companies really did have lots of employees and hefty balance sheets),.

Like many such compromises, it's become badly outdated but is very hard to change.

How did we end up with such a weird set of conditions for the small company accounts exemption?

Until 2006, all companies had to file full accounts. That was deregulated - but deregulation had to follow EU law requirements. Which meant the silly small company definition.

It breaks the fundamental deal behind incorporation: society gives businesses the protection of limited liability, in return for businesses disclosing their finances and other details about their business.

And it enables corruption and worse.

PPE Medpro had a balance sheet of £5m and three employees - so even if it's turnover had been a trillion pounds, it would still be "small".

Madness.

Small companies Your company will be ‘small’ if it has any 2 of the following: a turnover of £15 million or less £7.5 million or less on its balance sheet 50 employees or less If your company is small, you can: use the exemption so your company’s accounts do not need to be audited choose whether or not to send a copy of the director’s report and profit and loss account to Companies House send abridged accounts to Companies House

But PPE Medpro absolutely did qualify, because of the strange way the small company definition works:

It's the "any two" that's the problem.

The intention of the small company exemption is that we shouldn't be over-regulating small companies. That's a perfectly rational policy. It is, however, much less rational that a £200m business also qualifies for the exemption.

Why? Because the company was classified as "small" and so doesn't have to file full accounts, only a balance sheet.

PPE Medpro is the company which provided £200m of PPE to the Government in dubious circumstances, of which £122m was faulty. Reports suggest it made £65m profit - but we can’t know for sure. Its finances are a mystery, because it was allowed to file only abridged accounts.

Under UK law, a company can make £200m+ in sales and still hide its profit & loss by calling itself “small”.

That’s how PPE Medpro kept its finances secret.

A short thread on one of Britain’s daftest loopholes, the 1970s EU compromise that created it — and how to fix it.

You decide.

2. Barrowman and Mone reckoned that the chance of the Government winning in court AND then being able recover the money from them was high enough that it was worth paying £23m to make the whole thing go away.

1. Barrowman and Mone are truly very sorry and so, out of altruism and respect for the nation, were willing to pay £23m even though they knew the Government had no prospect of recovering this from them.

Why make such a settlement offer?

There are, logically, two possibilities:

This is the confidential settlement offer Barrowman/Mone made to the Government, offering to settle the litigation for £23m.

(We'd never normally see this, but for unfathomable reasons, Mone posted it on X.)

(The background: PPE Medpro itself is in administration, with almost no cash to its name. So no money is coming from it - and the question is whether the Government can pursue the money elsewhere.)

Lots of people asking about the Government's prospects for recovering the £120m from Barrowman/Mone/their companies

Short answer: I don't know. I'm not an insolvency specialist. No clue how the £120m was paid out to them from PPE Medpro

So I have no technical answer

But...

I'd welcome comments from others who've read the case. Am I correct?

But if I'm reading the case correctly then everything changes. No signed trust deed, and no written evidence a trust was created? Then, from a tax perspective, perhaps nothing happened.

!!!OBVIOUSLY THIS IS NOT ADVICE!!!

Until yesterday I would have said that probably doesn't matter - there was intention to create a trust so a trust arises, and the lack of written evidence just means it can't be enforced. The scheme still operates (a disaster for the taxpayer, because the scheme was incompetent)