The Small Companies (Micro-Entities’ Accounts) Regulations 2013 came into force in December 2013; these new regulations affecting smaller businesses. The purpose of these regulations is to reduce the amount of time business owners spend on the administrative aspects of their business, so instead of owners working for the business, they can focus their time working on the business!
To qualify as a Micro-Entity company, the following criteria must be met:
- Your turnover must not exceed £632,000
- You Balance Sheet total must not exceed £316,000
- Your average number of employees must not exceed more than 10
The regulations can be applied to financial years ending on or after 30 September 2013.
What are micro-entity accounts?
Micro-Entity accounts differ from a full set of accounts, because they only need to show a small amount of information. For example, the profit and loss account and balance sheet will have fewer details and the director’s report will only state the names of the director(s) and only two notes on the financial statement are needed. However, the effort that goes into composing a set of accounts involves the preparation of financial data in accordance with accounting principles, so the only time an accountant will save time is in the production. So regardless what type of accounts are produced, the amount of work required to compile a set of accounts remains the same. In summary, Micro-entity accounts are a simplified version of a full set of accounts.
What are the ramifications of Micro-entity accounts?
If you have plans now or in the future to obtain additional funding for your business, then having a set of Micro-entity accounts produced may hinder your chances of securing financial backing, because banks or lenders will insist on seeing a full set of accounts so they can assess your full financial position. Disclosing a full set of accounts will also aid you credit rating.
Another thing to consider, is that if you do decide to disclose only a limited amount of information in the form of Micro-entity accounts, then HMRC may choose to investigate your company.
Whilst Micro-entity accounts are presented in simple form, the level of work required by your accountant to produce these accounts still remains the same, so before deciding on what type of accounts to disclose, ensure you receive the full facts from your advisers.
If you’d like to know more or have any questions, please Contact Us