Micro-entity Filed Accounts
There are potentially 3 size classifications of a company to consider when looking at filed accounts, small, medium or large. For this article we’ll focus on the small company classification which also contains a sub-set called micro-entity, this subset is applicable to very small companies. The classifications are defined by a set of thresholds based on turnover, balance sheet total (total of the fixed and current assets) and the average number of employees, these determine whether a company needs to file micro-entity, small or medium-sized accounts.
Any companies that do not meet the criteria for micro-entities, small or medium are defined as large companies and will have to prepare and file full accounts.
Micro-entities can prepare and file a balance sheet with a reduced set of information than that required by larger companies. Additionally, a micro-entity will be able to benefit from the exemptions available to small companies such as exemption from audit and the requirement to file a directors’ report or profit & loss account at Companies House. However, Micro-entities still need to send accounts to their members as well as filing them at Companies House.
Thresholds to qualify as a micro-entity
A micro-entity must meet at least two of the following conditions:
- turnover must be not more than £632,000
- the balance sheet total must be not more than £316,000
- the average number of employees must be not more than 10
Entities that cannot prepare and submit micro-entity accounts
An entity cannot prepare and submit micro-entity accounts if it is, or was at any time during the financial year, one of the following;
- a limited partnership
- a qualifying partnership as defined under the Partnership (Accounts) Regulations 2008
- a public limited company
- an overseas company
- an unregistered company
- a company authorised to register under section 1040 Companies Act 2006
- a charitable company
- a company that is excluded from the small company’s regime under section 384 Companies Act 2006, or is excluded from being treated as a micro-entity under section 384B Companies Act 2006.
Qualifying as a micro-entity every year
Generally, a company qualifies as a micro-entity in its first financial year if it fulfils the conditions in that year. In subsequent years a company must fulfil the conditions in that year and the year before.
However, if a company which qualified as a micro-entity in one year no longer meets the criteria in the next year, it may continue to claim the exemptions available in the next year.
If that company then reverts back to being a micro-entity by meeting the criteria in the following year, the exemption will continue uninterrupted.
Contents of micro-entity filed accounts
A micro-entity is required to prepare accounts that contain the following elements:
- A balance sheet that complies with one of the specified formats given in the relevant regulations, along with any footnotes
- A directors’ report
- A profit & loss account that complies with the specified format given in the relevant regulations
- An auditors report unless the company is claiming exemption from audit as a small company
- Any notes relating to the accounts
The balance sheet must contain a statement in a prominent position above the director’s signature and a printed name that the accounts have been prepared in accordance with the micro-entity provisions. This statement should appear in the original accounts as well as the copy filed with Companies House.
Micro-entities do not have to deliver a copy of the directors’ report or the profit and loss account to Companies House.
Audit exemptions for micro-entities
A micro-entity may claim audit exemption as a small company. If it meets the qualification criteria for the exemption, it may submit unaudited accounts. See audit exemptions for further information.