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For accounting periods beginning on or after 01/01/2016 a small company must meet at least two of the following conditions:

  • annual turnover must be not more than £10.2 million
  • the balance sheet total must be not more than £5.1 million
  • the average number of employees must be not more than 50

For accounting periods beginning before 01/01/2016 the thresholds were:

  • annual turnover must be not more than £6.5 million
  • the balance sheet total must be not more than £3.26 million
  • the average number of employees must be not more than 50

Entities that cannot prepare and file small company accounts

A company cannot prepare and submit small company accounts if it is, or was at any time during the financial year, one of the following;

  • a public company
  • a member of an ineligible group (see below)
  • 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 (ie Undertakings for Collective Investment in Transferable Securities) management company or carried on insurance market activity

A group is ineligible if any of its members is:

  • a public company
  • a body corporate (other than a company) whose shares are admitted to trading on a regulated market in a European Economic Area State
  • a person (other than a small company) who has permission under Part IV of the Financial Services and Markets Act 2000 to carry on a regulated activity
  • a small company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company
  • a person who carries on insurance market activity

Companies which would otherwise qualify as small but which are members of ineligible groups can still take advantage of the exemption from including a business review (or strategic report) in the directors’ report prepared for members and from filing the directors’ report at Companies House.

Qualifying as a small company every year

Generally, a company qualifies as small in its first accounting period if it fulfils the conditions in that period. In any subsequent periods a company must fulfil the conditions in that period and the period before.

If a company which 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.

Conditions to qualify as a small group

For accounting periods beginning on or after 01/01/2016 to qualify as small, a group of companies must meet at least two of the following conditions:

  • aggregate turnover must be not more than £10.2 million
  • the aggregate balance sheet total must be not more than £5.1 million
  • the aggregate average number of employees must be not more than 50

For accounting periods beginning before 01/01/2016 the thresholds were:

  • aggregate turnover must be not more than £6.5 million
  • the aggregate balance sheet total must be not more than £3.26 million
  • the aggregate average number of employees must be not more than 50

Contents of small company accounts

Generally, small company accounts prepared for members include:

  • a profit and loss account
  • a balance sheet, signed by a director on behalf of the board and the printed name of that director
  • notes to the accounts
  • group accounts (if a small parent company chooses to prepare them)

And they should be accompanied by:

  • a directors’ report that shows the signature of a secretary or director and their printed name
  • an auditors report that includes the printed name of the registered auditor (unless the company qualifies for exemption from audit and takes advantage of that exemption)

The balance sheet must contain a statement in a prominent position above the director’s signature and printed name that the accounts have been prepared in accordance with the special provisions applicable to companies subject to the small companies’ regime.

Small companies do not have to deliver a copy of the directors’ report or the profit and loss account to Companies House. However, if they opt not to deliver a copy of the profit and loss account the company must state this on the balance sheet.

The requirements for companies subject to the small companies’ regime are set out in Parts 15 and 16 of the Companies Act 2006. Further information on the detailed format and content of accounts for small companies can be found in the relevant regulations.

Small company abridged accounts

The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 introduced the concept of abridged accounts. Abridged accounts contain a balance sheet that contains a sub-set of the information that is included in a full balance sheet. Likewise, the profit and loss account may also contain a sub-set of the information that is included in a full profit and loss account.

Companies must now prepare and file the same set of accounts for its members as for the public record. This means that a company will decide at the point they are preparing their accounts whether or not to abridge them (or to prepare micro-entity accounts). Previously a company would prepare full accounts for its members and would then decide whether or not to abbreviate them for the public record.

If you opt to file an abridged balance sheet and/or profit & loss account then you must include a statement on the balance sheet that the members have agreed to the preparation of abridged accounts for this accounting period in accordance with section 444(2A).

  • Small companies preparing International Accounting Standards accounts must deliver a full balance sheet to Companies House.
  • Small company abbreviated accounts

The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 abolished abbreviated accounts. This means that abbreviated accounts cannot be prepared and filed for accounting periods beginning on or after 1 January 2016.

Special rules for small groups

A parent company which qualifies as small need not prepare group accounts or submit them to Companies House if the group is small and not ineligible – see question 4 above. If a small parent company decides to prepare group accounts their content is prescribed by the 2006 Act and by Schedule 6 to the Small Companies and Groups (Accounts and Directors’) Report Regulations 2008.

If you prepare group accounts they must contain a statement above the printed name and signature on the balance sheet, confirming that they are prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.

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