Audit Exemption for subsidiary

In certain circumstances your subsidiary may claim audit exemption if your parent company is established under the law of an European Economic Area (EEA) state.

You must submit the following documents to Companies House to claim the exemption. And the documents must reach Companies House before the date on which your company accounts are due.

  • A written notice that all members of the subsidiary company agree to the exemption in respect of the relevant financial year.
  • The completed Companies House form AA06. This is the statement of guarantee by a parent undertaking of a subsidiary company in respect of the relevant accounting year. The law supports this is the section 479C of the Companies Act 2006.
  • A copy of your parent undertaking’s consolidated accounts. This includes a copy of the auditor’s report and the annual report on those accounts.

Your Parent’s consolidated accounts must consolidate your subsidiary accounts either for the relevant financial year or to an earlier date in the same financial year. Another thing is your parent undertaking must also disclose in the notes to their consolidated accounts that your subsidiary is exempt from auditing their accounts. This includes the law which it relies on which is the section 479A of the Companies Act 2006.

Your parent’s consolidated accounts must also show your subsidiary company’s name and registered number in a prominent place on the document.

Take note that the audit exemption will only be available if your subsidiary company’s financial year ends on or after 1 October 2012.

Company not allowed to claim audit exemption as a subsidiary

In short your subsidiary is not entitled to audit exemption if it was at any time within the relevant financial year, it is a:

  • Quoted company.
  • Company that is an authorised insurance company, a banking company, an e-Money issuer, a MiFID investment firm or a UCITS management company.
  • Company that carries on insurance market activity.
  • Special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 (c 52) or an employers’ association as defined in section 122 of that Act or Article 4 of the Industrial Relations (Northern Ireland Order 1992 (S.I. 1992/807 (NI 5).

The Companies House form AA06

Your statement of guarantee must present the following information.

  • Registered name and number of your subsidiary.
  • Your subsidiary’s financial year to which the guarantee relates.
  • The statement date.

You must also include the details of the section of the Companies Act 2006 under which the guarantee is being given. For examples,

  • Section.394c – exemption from preparing accounts for a dormant subsidiary.
  • Section.448c – exemption from filing accounts for a dormant subsidiary.
  • Section.479C – audit exemption for a subsidiary undertaking.

In addition, you must also provide the name of your parent undertaking such as if the parent was incorporated in the UK, its registered name and registered number. In the case of if the parent was incorporated and registered (in the same country) elsewhere in the EEA, its registered name, registration number and the identity of the register where it is registered.

The Effect of the guarantee and when it takes effect

In effect the parent undertaking guarantees all outstanding liabilities that your subsidiary is subject to at the end of the financial year. The guarantee takes effect when it is delivered to Companies House. It remains in force until all of the liabilities have been satisfied.

Audit exemption compliance

For example, your balance sheet in your individual company account must include an audit exemption statement to the effect that. This is as follows.

  • For the year ending (dd/mm/yyyy) the company was entitled to exemption from audit under section 479A of the Companies Act 2006 relating to subsidiary companies.
  • The members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476.
  • The directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts.

Seek accountants help if you are not familiar with the consolidation of group accounts. Companies House may seek clarification on your subsidiary filing.

Company accounts

Send your subsidiary company accounts on time to Companies House. Otherwise, you would receive an automatic late filing penalty even if your accounts just late by one. The penalty starts from £150 to £1500 depending on how late.

However, you can avoid the late filing penalty. Start preparing your accounts soon after the year-end. With this would allow ample time for filing.

Companies House may strike off company with long overdue accounts. They usually send reminders to your registered office. If there is no response from you then they would initiate the proposal to strike off. Write to Companies House if you would still like to keep your company and state your reasons. Companies House will response to your request whether they approve. If they do, you must comply to their specified deadline.

Confirmation statement

Another document you must send to Companies House every year is the confirmation statement. This document would have nothing to do with your company performance or your profit and loss or your balance sheet. It is a statement to confirm that your company information is still valid as at your confirmation statement due date.

Authentication code

You can file your confirmation statement online or on paper. You would require your authentication code to file online. The code is the electronic equivalent of your company director’s or secretary’s signature. Therefore do not share your code with anyone and always keep it safe.

Do not worry if you have misplaced or someone has got hold of your authentication code. If you have misplaced your code request it again from Companies House. It takes 5 working days for the code to arrive at your registered office.

If you cannot get your letter sent to your registered office you must change your registered office. After that request the code again.

Companies House would not send your code to anywhere else. No matter how hard you try to persuade them. They would just say no. They just do what the law says.

On one hand if someone has your code. It is possible to change it. You can do so using the web filing service. You can reset your code there.

It is imperative you file your confirmation statement on time too. This is to avoid Companies House dissolve your company. Once your company has been dissolved, you would have to restore it if you still like to keep it.

17 Comments

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