Every limited company may prepare and submit small company accounts with Companies House if your company meet the criteria of a small company according to special provisions in the Companies Act 2006 and the relevant regulations. This means you can choose to disclose less information in your company accounts compared to that of a medium-sized or a large company.
Criteria to qualify as a small company
To qualify your limited company must meet at least two of the following conditions:
|After 01 Jan 2016||Before 01 Jan 2016|
|Turnover||Must not exceed £10.2 million||Must not exceed £6.5 million|
|Balance sheet total||Must not be more than £5.1 million||Must not be more than £3.26 million|
|Average employees||Not more than 50||Not more than 50|
A company cannot prepare and submit small company accounts
Your company cannot prepare and submit small company accounts with Companies House if one of the following events has taken place. Your company are, or was at any time during the financial year:
- A public limited 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 limited company.
- A body corporate (other than a company) whose shares are admitted to trading on a regulated market in an EEA 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.
Above all, financial services companies are regulated by the Financial Conduct Authority.
Eligible to deliver small company accounts every year
Generally, your company is qualified to deliver small company account in the first accounting period if you fulfil the conditions in that period. In any subsequent periods, your company must fulfil the conditions in that period and the period before that.
On one hand, If your company qualified as small in one period no longer meets the criteria in the next period, you may continue to claim the exemptions available for the next period. If your 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 of companies
Basically your company must meet at least two of the following criteria:
|After 01 Jan 2016||Before 01 Jan 2016|
|Aggregate turnover||Not more than £10.2 million||Not more than £6.5 million|
|Aggregate balance sheet total||Not more than £5.1 million||Not more than £3.26 million|
|The aggregate average number of employees||Not more than 50||Not more than 50|
Contents of small company accounts
Generally, your small company accounts must 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.
- Disclosure notes to the accounts.
- Group accounts (if a small parent company chooses to prepare them).
- 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 your company qualifies for audit exemption.
Without reservation, your balance sheet must contain a statement in a prominent position above your director’s signature and printed name that your company accounts have been prepared in accordance with the special provisions applicable to companies subject to the small companies’ regime.
On the same note, your company do not have to deliver a copy of the directors’ report or the profit and loss account to Companies House. However, if you opt not to deliver the profit and loss account your company must state this fact on the balance sheet. Otherwise, you only deliver a signed balance sheet with disclosure notes to Companies House.
For further reading, the requirements for companies subject to the small companies’ regime are set out in Parts 15 and 16 of the Companies Act 2006.
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 your company will decide at the point you are preparing your accounts whether or not to abridge them (or to prepare micro-entity accounts). Previously your company would prepare full accounts for your 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 with Companies House after 1 January 2016.
Other small company exemptions
The Companies Act 2006 and regulations also set out what the directors’ report of a small company must contain. Your director report does not have to contain a business review (or strategic report) or a statement as to the amount that your directors recommend being paid by way of dividend. If your company has taken advantage of the small companies’ exemption in preparing your directors’ report it must contain a statement above your director’s or secretary’s signature and printed name to that effect.
Your small company may also claim exemption from the audit. In this circumstance, you may submit unaudited company accounts.
Your small company which has chosen to not file your profit and loss account may also opt not to file a copy of your auditor’s report on your accounts. In this instance, you must make the following disclosures in the notes to your company accounts: your auditor’s name (if your auditor was a firm, the name of the senior statutory auditor), to state whether your auditor’s report was qualified or unqualified, and, if your audit report was qualified, what the qualification was.
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. If your small parent company decides to prepare group accounts your content is prescribed by the Companies Act 2006 and by Schedule 6 to the Small Companies and Groups (Accounts and Directors’) Report Regulations 2008.
If you prepare group accounts you must include a statement above the printed name and signature of your directors on the balance sheet, confirming that your accounts are prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.
Another important document a limited company must take care of is the confirmation statement.