UK Government issues long-awaited consultation on modernising corporate reporting

The UK Government’s Department for Business, Innovation, Science and Trade (DBIST) has launched a major consultation on the future of corporate reporting. Its proposals could significantly change the current UK reporting framework.

The consultation, Modernising Corporate Reporting to Support Long-Term Economic Growth, seeks views on how corporate reporting can be simplified, modernised and refocused to better support investment in the UK, access to finance and economic growth. Members can help shape these reforms by sharing their views with us before we submit our response.

The consultation is open until 30 November 2026. It contains proposals  in several areas including:  

• Company size categories
• Financial reporting
• Strategic reporting
• Sustainability disclosures
• Corporate governance
• Remuneration reporting
• Digital reporting
• Audit
• Future regulatory oversight

The proposition is that corporate reporting should provide financially material and decision-useful information for investors and creditors, while reducing unnecessary complexity and compliance burdens for businesses.

The Government argues that, while the UK's reporting framework has been instrumental in supporting confidence, transparency and investment, it has grown increasingly complex through decades of incremental additions and reforms. Annual reports have become longer, more prescriptive and more costly to produce, often making it harder for users to identify the information that matters most.

Five principles guide the proposed reforms: 

1. Annual reports and accounts should have a clear purpose and be focused on providing financially material information that supports decision-making by investors and creditors.  
2. Companies should have greater flexibility to explain their business model, performance and prospects, with directors trusted to exercise judgement in determining what is material.  
3. Reporting requirements should be simpler and more coherent, avoiding duplication between company law, accounting standards and regulatory requirements. 
4. Requirements should be proportionate, reflecting company size, ownership structure and economic significance.  
5. The framework should be fit for the future and capable of adapting to technological change and new forms of reporting. 

The Government's overarching ambition is to create what it describes as "the most proportionate and effective" corporate reporting framework in the world, while contributing to wider efforts to reduce regulatory burdens on business.

Simplifying reporting requirements for businesses

A major theme throughout the consultation is the simplification of company categories, thresholds and exemptions.

The Government is considering creating a broader SME reporting regime that would remove many of the distinctions between small and medium-sized companies. Medium-sized companies could gain access to a wider package of exemptions currently available only to small companies.

One of the most significant proposals is the possible extension of audit exemption to certain medium-sized companies. The Government is seeking evidence on whether the costs of mandatory audits continue to be justified for all medium-sized entities and whether audit exemption could be expanded without adversely affecting access to finance.

The consultation also examines existing ineligibility criteria that prevent some companies from accessing reporting exemptions, including those operating within group structures. The Government is exploring whether more subsidiaries should be able to benefit from simplified reporting requirements.

Alongside this, it’s looking for views on introducing a new category of "very large" company for certain non-financial reporting requirements. The aim would be to replace multiple overlapping thresholds with a clearer and more consistent framework.

Reimagining the financial reporting framework

The consultation proposes a substantial redesign of the relationship between company law and accounting standards.

Currently, detailed financial reporting requirements are spread across the Companies Act 2006, associated regulations and accounting standards. The Government believes this creates duplication and complexity. It proposes moving detailed requirements from legislation into accounting standards, while company law would set high-level principles and determine which standards apply to different categories of company.

The Government envisages a streamlined framework based around four principal accounting frameworks:

• UK-adopted International Accounting Standards (UK-IAS)
• UK GAAP for large companies
• UK GAAP for SMEs
• UK GAAP for micro-entities

The consultation also considers reforms to the long-standing requirement for accounts to give a "true and fair" view. While retaining the concept as an overarching principle, the Government proposes simplifying its application, particularly for SMEs and micro-entities.

Further proposals include:

• Creating a dedicated accounting standard for not-for-profit organisations.
• Reforming subsidiary reporting requirements.
• Introducing a voluntary assurance standard for SMEs.
• Replacing existing distributable profits and capital maintenance rules with a solvency-based framework for determining whether dividends can be paid lawfully.

A similar proposal for a solvency-based framework was previously rejected during the company law reform consultation that ultimately led to the Companies Act 2006. If adopted, the proposal would represent a fundamental shift in UK company law and replace complex calculations of distributable reserves with a requirement for directors to confirm that a dividend would not undermine the company's solvency.

Refocusing strategic reporting

The Government is proposing significant reforms to strategic reporting requirements. Rather than prescribing extensive lists of disclosure topics, the consultation proposes a principles-based framework built around a set of baseline disclosures. These would require reporting on: 

• The business model
• Performance
• Resources and relationships
• Company strategy
• Risks

The intention is to move away from a compliance-driven approach towards reporting to an approach that better explains how a company creates value and manages risks.

A notable proposal is the removal of several specific statutory disclosure requirements where the information is not financially material. These include disclosures on environmental matters, employees, social and community matters, human rights and anti-corruption issues. Companies would still be expected to report on these areas where they are materially relevant to business performance or risk.

The consultation also proposes replacing the section 172 of the Companies Act 2006 duties with broader reporting on resources and relationships, integrating stakeholder considerations more directly into strategic reporting.

Sustainability reporting remains under review

The consultation doesn’t propose immediate changes to climate-related financial disclosure requirements. Instead, the Government is undertaking a separate post-implementation review of the existing climate-related disclosure regulations and will use the findings to inform future decisions.

The document highlights the publication of UK Sustainability Reporting Standards (UK SRS 1 and UK SRS 2) and reiterates support for the International Sustainability Standards Board's financially material approach to sustainability reporting. Future decisions on how UK SRSs fit within company reporting obligations will be informed by the consultation and ongoing policy development.

The Government is also consulting on whether sustainability information should be integrated throughout the strategic report or presented within a distinct section.

Reforming corporate governance and remuneration reporting

Corporate governance reporting is also under review. The Government is exploring whether governance reporting should move from individual company level to group level, recognising that strategy, governance and risk management are often directed centrally within corporate groups.

The consultation seeks views on simplifying governance reporting requirements, clarifying the definition of corporate governance and considering whether some information could be published online rather than repeated within annual reports.

In relation to remuneration reporting, the Government believes certain key disclosures should remain, including directors' total remuneration, remuneration policies, performance measures and long-term pay-performance information. However, numerous existing requirements could be removed or simplified.

Potentially removable requirements on remuneration include:

• CEO-to-employee pay ratio disclosures.
• Reporting on remuneration committee activities.
• Certain shareholder engagement disclosures.
• Disclosures relating to employee engagement on pay.
• Disclosure of results of annual shareholder votes on directors’ remuneration.

The Government is also consulting on whether the advisory annual shareholder vote on remuneration reports should be abolished, leaving the binding vote on remuneration policy as the principal shareholder approval mechanism.

Embracing digital reporting

As expected, a substantial section of the consultation focuses on digital transformation.

The Government intends to make electronic communication with shareholders the default option, removing the need to obtain permission before sending documents electronically. Shareholders would continue to retain the right to opt for printed communications.

The consultation also confirms plans to clarify that annual general meetings may be conducted fully virtually, provided shareholders consent.

Further proposals include increasing the use of digital tagging and structured data within annual reports, placing greater emphasis on iXBRL and other machine-readable formats, and considering whether certain disclosures could be migrated from annual reports to corporate websites or digital portals.

The Government is also seeking views on how AI may affect both the preparation and use of corporate reporting.

Future regulation and oversight

To prevent reporting burdens from growing again over time, the Government has established a new "Reporting Gateway" function within BIST.

The Reporting Gateway will scrutinise future reporting proposals across government against criteria including strategic fit, consideration of cost versus benefit, international alignment, understandability and usability. The objective is to ensure that future reporting obligations remain proportionate and focused on decision-useful information.

The consultation also proposes revoking the Reports on Payments to Governments Regulations 2014 following a review that concluded the regime was not meeting its intended objectives.

In addition, the Government proposes measures to improve transparency around auditor appointments by requiring companies to notify Companies House when auditors are appointed or cease to hold office, allowing users of the Companies House register to access more complete information on audit arrangements.

A once-in-a-generation opportunity

The consultation presents one of the most comprehensive reviews of UK corporate reporting since the Companies Act 2006.

Its proposals extend far beyond technical amendments, challenging fundamental assumptions about who reporting is for, what information should be provided, how disclosures should be delivered and how regulation should evolve in an increasingly digital economy. The Government believes these reforms could reduce administrative burdens, improve clarity and support economic growth, while maintaining trust and confidence in UK businesses and capital markets.

For preparers, investors, creditors, auditors and professional bodies, the consultation provides an important opportunity to help shape the future direction of corporate reporting in the UK.

We want to hear from you

We’ll be responding to the consultation. Member views on any aspect of the consultation are welcome and should be sent to connect@icas.com.