Under the proposals, the turnover threshold at which co-operatives and community benefit societies will have to appoint an auditor will increase from £5.6m to £10.2m and the assets threshold will increase from £2.8m to £5.1m.

Co-operatives are not owned by institutional investors or shareholders, but by their members, while community benefit societies are run on a one-member-one-vote basis and play a key role in supporting their members and communities.

In the consultation document, the government said: ‘Account auditing and reporting requirements can be burdensome for small co-operatives and community benefit societies, especially in comparison with those for companies of the same size, including Community Interest Companies. The government wants to reduce the administrative burden faced by smaller societies.’

The proposal would bring co-operatives and community benefit societies into line with wider business. In 2015, the government raised the audit exemption threshold for SMEs, introducing three-part criteria, which businesses have to meet two of, to determine whether they are exempt. The criteria are having fewer than 50 employees; an annual turnover below a specified maximum amount (now £10.2m); or assets worth no more than a maximum (currently £5.1m).

Under the current rules for co-operatives and community benefit societies, some societies can choose to ‘disapply’ the requirement to appoint an auditor and prepare a less onerous audit report instead if they meet all of the following conditions:

• turnover is less than £5.6m
• assets are less than £2.8m
• their members have passed a resolution to disapply the requirement
• they are not on the list of exempted societies that cannot disapply the requirement 

The government expects that up to 250 societies that currently have turnover between £5.6m and £10.2m and assets between £2.8m and £5.1m will benefit in their next accounting period.

It also estimates the societies which no longer have to appoint an auditor will save between £5,000 and £10,000.

It added that of a total of 7,000 co-operatives and community benefit societies in the UK, the threshold rise would mean that more than 5,000 could be eligible to disapply the requirement to appoint an auditor.

On the point that the threshold change could undermine accountability, the government said: ‘Co-operatives and community benefit societies below the new threshold will not be required by law to appoint an auditor. However, unless the members of a co-operative or community benefit society pass a resolution to disapply the audit requirement, they are still legally obliged to do so. The FCA also retain the right to prevent a society disapplying their audit requirement.’

The consultation is available here and runs until 22 September 2017