In May 2023, the DBT working with the Financial Reporting Council (FRC), initiated a review of the non-financial reporting requirements UK companies need to comply with to produce their annual report and to meet broader requirements that sit outside of the Companies Act 2006.  The review looked at what opportunities exist to refresh and rationalise current reporting requirements so that the UK’s non-financial reporting framework is fit for purpose and delivers decision-useful information to the market.

Following the summary of responses to the call for evidence, the impact assessment outlines key planned changes including:  

• Uplift in size thresholds - the Companies Act 2006 company size thresholds are to be increased by 50% in order to reflect historical and future inflation and to reduce regulatory burdens on business.
• Removing requirements from the Directors’ Report: a number of current requirements within the Directors’ Report will be removed either because they are duplicative or no longer considered to provide useful information. This includes information on financial instruments, important events, likely future developments, research and development, branches, employment of disabled persons, engagement with employees, and engagement with suppliers, customers and others.
• Removing requirements from the Directors’ Remuneration Report and Directors’ Remuneration Policy: content which was introduced into UK law as a result of implementing the EU Shareholder Rights Directive will be removed. For example, the requirement to compare the annual percentage change in each director’s remuneration to the average percentage change of employee remuneration as a whole, over a five-year comparison period.

Outside of the reporting framework, changes will also be made to enable annual reports to be shared digitally with members in the first instance and in relation to various audit-related matters including to make technical corrections to the audit regulatory framework on audit committees.

The government intends to make the changes via secondary legislation with a commencement date for the proposals of 1 October 2024.  The statutory instrument to implement these changes is due to be laid before Parliament in Summer 2024. This is considered the first step in the government’s wider reform programme, with further proposals relating to the UK’s non-financial reporting framework expected to be published for public comment in 2024.

A press release is available on the government website.  The impact assessment and summary of responses to the call for evidence are available on the DBT website. 

Update 22 March 2024 - the FRC has issued a press release on its website welcoming these plans.  An FRC podcast discussing what this means for conmpanies is also available on the FRC website.