The government has today published draft legislation that removes a key financial burden for some co-ops, helping to put them on a level playing field with other business forms.
The reform, which Co-operatives UK has lobbied for over the last year, raises the threshold at which co-operative and community benefit societies are forced to conduct a full professional audit to a level equivalent to companies. The threshold moves from £5.6 million in turnover and £2.8 million in assets, to £10.2 million in turnover and £5.1 million in assets.
We welcome the proposed changes, originally announced in the Spring Budget, and we estimate that the measure could save societies at the threshold between £5,000 and £10,000 a year in extra audit fees.
Crucially, members of small societies can still choose to conduct a full audit if they wish - this is an optional exemption for the audit requirement.
This legislation does not apply to Northern Ireland.
"We are pleased government has heeded calls to remove this unnecessary extra burden on co-operative and community businesses. This is a great example of the practical steps government can take to support the UK's co-operative sector, which plays a key role in fostering a more inclusive economy."
Ed Mayo, Secretary General of Co-operatives UK
Add your support
The draft legislation published today is now open to consultation until 22 September 2017. Co-operatives UK has developed a template response which co-operatives and community benefit societies, and all other supportive co-ops, are welcome to use to give their views on the proposed legislation.
How and when will it happen?
Once the consultation has closed the legislation will progress through parliament with the new higher threshold likely to come into effect in the first half of 2018.Thew new legislation will happen through 'secondary legislation' and will update Section 84 of the Co-operative and Community Benefit Societies Act. Note: this change will not affect credit unions or registered social landlords.
What about charitable community benefit societies?
The draft legislation does not update the audit threshold for charitable community benefit societies to make this level with charitable companies. We have pointed this out in our template response and hope this additional change can be made relatively easily using the same powers.
What about the auditors' report requirement?
Co-operatives UK has also been pressing for significant changes to the auditors' report' requirement for societies with a turnover over £90,000, which we know is most irksome. While HM Treasury officials agreed that changes were required, they took the view that this required primary legislation, which is simply not an option in their department at present. We will keep at this though, because it's a burden that needs to be dealt with.
What about Northern Ireland?
Prior to the dissolution of the Northern Ireland Assembly in March 2016, we secured commitments from MLAs and the Economy Minister Bell to explore further changes to the society legal framework in 2018, and began talks with officials in the Ministry for the Economy. By now we had hoped to be in detailed discussion with officials and MLAs regarding further improvements to society legislation in Northern Ireland. Unfortunately the ongoing delay in the resumption of power-sharing means no progress has been made and the way forward is currently unclear. We are currently seeking clarification from the Ministry for the Economy as to what the next steps should be.