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Small Business, Enterprise and Employment Act 2015

Definition of small and micro business

Section 33: Definitions of small and micro business

232.This section provides for statutory definitions of the terms “small business” and “micro business”. Subsections (2) and (3) set out basic definitions by reference to staff headcount and other conditions, and subsection (4) gives the Secretary of State powers to make regulations further defining these terms. It is intended that the approach to defining these terms will closely follow the approach of EU Commission Recommendation 2003/361/EC to defining “small enterprise” and “microenterprise”. Regulations made under this section will be subject to the negative procedure (see subsection (7)).

233.Subsection (6) defines expressions used in this section. Among other things, it defines the term “undertaking”, which is used in the definitions of “small business” and “micro business”. Undertakings comprise individuals, companies, and other entities carrying on a business – and also community and voluntary bodies, as defined in section 27 but also including foreign equivalents.

234.Subsection (1) enables the definitions of “small business” and “micro business” to be relied on in subordinate legislation made by UK Ministers, and this could occur for example where smaller businesses are exempted from new regulatory obligations. Subsection (5) enables such subordinate legislation to rely on modified versions of the definitions.

Section 34: Small and micro business regulations: further provision

235.This section sets out the permitted content of regulations under section 33 (the regulations will also define expressions used in section 33(2) and (3), such as “headcount of staff”: see section 33(6)). Regulations made under these powers are referred to as “the small and micro business regulations”.

236.The permitted content includes provision about the following: the calculation of staff headcount, turnover, and balance sheet total (subsection (1)(a)); the extent to which a connection with another business (for example a parent-subsidiary relationship) affects the small or micro status of a particular business (subsections (1)(b) and (2)); the periods to be used for assessment (subsections (3)(a) and (4)); and how a new business will be assessed (subsection (3)(b)).

237.Subsections (5), (6) and (7) contain powers to make provision to safeguard against abuse of the definition – for example by artificially transferring business activities to a new undertaking purely to avoid loss of small or micro status.

238.Subsection (8) allows the small and micro business regulations to provide that certain types of undertaking cannot qualify as small or micro businesses, irrespective of their size.

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