With inflation driving up the cost of goods, high-ticket items like cars have seen a noticeable rise in price. Today’s family SUV now often starts at £40,000 — a number that may make anyone rethink what they expect to pay for a new vehicle.
This increase isn’t just felt at the consumer level; it’s also apparent in the financial statements of many motor retailers. Turnover can rise by 5-10% year-on-year without actual business growth. This trend is driven by higher material and labour costs, as well as the shift toward more advanced PHEV and BEV platforms.
Putting this into perspective, the Consumer Price Index (CPI) for new cars, for example, rose by over 13 points from 2021 to 2023. And with these higher prices, more family-owned dealerships are approaching thresholds that trigger complex corporate reporting requirements.
BEYOND THE NUMBERS
Many motor retailers may appear as straightforward corporate entities at first glance, particularly when looking at their headline turnover. But dive a bit deeper, and you’ll see that reaching certain financial thresholds brings added complexity. A prime example is the £200 million turnover mark, where larger entities often find themselves required to enter the Senior Accounting Officer (SAO) regime, introducing more governance and reporting obligations.
Going further up the scale, the demands increase again. When turnover climbs above £500 million or employee numbers surpass 500 full-time equivalents, companies must meet additional requirements under the Task Force on Climate-Related Financial Disclosures (TCFD) framework. This step up highlights the evolving responsibilities of motor dealers as they grow, making it clear that size and revenue bring their own layers of corporate accountability.
Interestingly, the shift to an “agency model” could reduce reported turnover for some car retailers, as manufacturers take a more direct role in sales. However, the adoption of this model in the UK and EU has been slower than anticipated, so most dealerships continue to report increased revenues under the current system.
THRESHOLD CHANGES AND SIMPLIFIED REPORTING
In March 2024 a ministerial statement indicated that the UK government intends to ease corporate reporting by increasing the thresholds that determine company size and audit requirements by around 50%, effective October 2024. Here’s a summary of the new thresholds:
| Small | Medium | Large | |
| Annual Turnover | > £10.2m to > £15m | > £36m to > £54m | £36m+ to £54m+ |
| Balance Sheet | > £5.1m to > £7.5m | > £18m to > £27m | £18m+ to £27m+ |
| Employees | > 50 to > 250 | 251+ |
WHAT DOES THIS MEAN FOR MOTOR RETAILERS?
- Reduced Reporting Requirements – Companies hovering near the medium or large thresholds might see a reprieve from additional reporting obligations, making compliance a little simpler and less time-consuming.
- Changes in TCFD and Public Interest Entity (PIE) Requirements – These thresholds may be re-evaluated, potentially easing some of the regulatory burdens for larger companies, especially around climate and public interest disclosures.
- Audit Implications – Some companies might fall below the audit threshold in future years. However, many lenders, particularly captive finance providers, still require an independent audit opinion for funding. Approximately 13,000 medium-sized companies may be reclassified as small, removing the statutory audit requirement for them, but the need for an audit opinion could remain for financing purposes.
Curious about how these changes could simplify your company’s reporting? Get in touch to find out how we can help you navigate the new thresholds and make the most of these updates.
