Micro Entity Accounts

The Small Companies (Micro-Entities’ Accounts) Regulations 2013 were approved by the UK Government and introduced major (but optional) accounting exemptions for micro-entities. Micro-entity companies must meet at least two out of the three conditions:

  • turnover less than £632,000

  • balance sheet total not more than £316,000

  • and less than 10 employees

The benefits of being a micro-entity is that your set of accounts will be condensed and the amount of information held at Companies House about your business will decrease.

Another advantage to Micro-Entity accounts is the reduced information that has to be disclosed to HMRC.  However, the Corporation tax return remains unchanged.

Also, credit referencing agencies and banks may require additional information to make credit decisions for loan finance and asset purchases.

The amount of work required to complete a set of Micro-Entity accounts is effectively the same producing a set of Small Company accounts, the only difference being is the reports that are produced. All figures must be accurate and complete, even though they’re not shown on the reports submitted to Companies House.

Whilst you can file a set of Micro-Entity accounts and take advantage of the lower level of disclosure to HMRC, we believe it is as equally beneficial for all parties to provide detailed financial information to allow lenders and suppliers to make informed business decisions.

Small Company Accounts

Limited company financial accounts are often referred to as Annual Accounts

A small Company can prepare and submit accounts according to special provisions in the Companies Act 2006 and the relevant regulations. This means they may choose to disclose less information than medium-sized companies, and they need not submit to an audit.

A Company is classed as small if it satisfies at least 2 of the following conditions:

  • Its annual turnover is less than £6.5 million.

  • It has a balance sheet of no more than £3.26 million.

  • It employs less than 50 people.

A Company qualifies as small in its first accounting period if it fulfils the conditions in that period. In any subsequent periods, the Company must fulfil the conditions in that period and the period before; however, if a company that qualified as small in one period no longer meets the criteria in the next period, it may continue to claim the exemptions available for the next period. If that Company then reverts back to being small by meeting the criteria for the following period, the exemption will continue uninterrupted.

Small companies need only submit abbreviated accounts (balance sheet and notes) to Companies House, but full accounts should be prepared for members and HMRC.

Medium sized Company Annual Accounts

To qualify as a medium-sized Company, at least two of the following conditions must be met:

  • Annual turnover is less than £25.9 million

  • Balance sheet total of less than £12.9 million

  • Average number of employees does not exceed 250

These reporting limits will increase for medium companies with financial years starting on or after 1st January 2016, or you can choose to adopt the new rules now if your accounting period started on or after 1st a January 2015.

However, a Company will not be considered medium sized if it is, or was at any time during the financial year, one of the following:

  • A public Company

  • A Company that has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity or that carries on an insurance market activity.

  • A member of an ineligible group

  • public Company

  • body corporate (other than a Company) whose shares are admitted to trading on a regulated market

  • person (other than a small Company) who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity.

  • small company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID (i.e. Markets in Financial Instruments Directive) investment firm or a UCITS (i.e. Undertakings for Collective Investment in Transferable Securities) management company.

  • person who carries on insurance market activity.

Medium-sized accounts must include the following particulars for their members:

  • Profit and loss account.

  • Balance sheet with a director’s printed name and signature.

  • Notes to the accounts.

  • Group accounts (if appropriate).

  • Directors’ report, including a business review (or strategic report) showing the printed name of the approving secretary or director.

  • Auditor’s report that includes the name of the registered auditor, unless the Company is exempt from audit and includes and audit exemption statement.

Dormant Company Accounts

Companies that have been dormant since their incorporation (i.e. they have never traded) can prepare and file dormant accounts online via Web Filing. The following information should be included:

  • Company name and registration number

  • Date of balance sheet

  • Details of shares issued (companies limited by shares only)

  • Audit exemption statement

  • Director’s details

If a dormant company has previously traded, dormant accounts cannot be used. Instead, abbreviated accounts should be filed at Companies House.

A dormant Company does not need to prepare annual accounts for HMRC if it has been dormant during its entire financial year. If a Company becomes dormant mid-way through a financial year, it will have to prepare a final Company Tax Return and statutory accounts for HMRC for that period of trading.