ICAEW has criticised changes to the accounting requirements for micro businesses announced in the Budget, which it says may make it even harder for small companies to access finance in the future.

The warning comes in the institute's response to a consultation by the Department for Business, Innovation and Skills (BIS). ICAEW says there are 'fundamental risks' in the proposals under consideration which have yet to be fully assessed.

Dr Nigel Sleigh-Johnson, head of ICAEW's financial reporting faculty, said: 'We have a number of concerns about the suggested changes, as they may result in less transparency and less useful financial information. This, in turn, can over time have a negative impact on market confidence and on micro businesses' ability to access finance, at least at the margins.'

ICAEW says it has particular concerns over the proposed mixing of two different types of accounting, cash and accruals, saying that combining the two may cause confusion and misunderstanding. It also wants BIS to widen the scope of the consultation paper to cover issues, such as the implications for tax compliance and for the determination of distributable profits.

ICAEW is also challenging BIS's view that the proposals will cut the regulatory burden for small businesses and save them money. This echoes comments made by ICAS in its submission to the consultation last week.

Sleigh-Johnson said: 'In our view it is a myth that accounting is one of the more significant burdens on micro businesses. Much of the accounts preparation process is done automatically, using specialist software. While the impact of the proposals would vary from business to business, any savings in accounts preparation costs are likely to be limited for the majority.'

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