May 10, 2017 Filing smaller company accounts
Companies house has issued a reminder for small companies to effect that changes to UK company law has removed the option for filing abbreviated accounts for accounting periods starting on or after 1 January 2016. That doesn’t mean, however, that small and micro-entities have to prepare and submit a full set of accounts; although that option is open to them. The legislation has instead introduced a new concept of abridged accounts which, alongside micro-entity accounts, is available as an option for smaller businesses.
Essentially, abridged accounts comprise an abridged balance sheet alongside an abridged profit and loss account, both containing an identified subset of the information which would appear on a full accounting report. Perhaps adding to the complexity, abridged accounts can be ‘filleted’ with companies electing not to file copies of the directors report and/or profit and loss accounts. In this last scenario, companies may also opt not to file a copy of any audit report received.
In order to be able to submit abridged accounts companies must satisfy at least two out of three criteria, namely;
- turnover is no more than £10.2 million
- balance sheet total no more than £5.1 million
- average number of employees no more than fifty
Importantly, companies preparing and submitting abridged accounts have to first receive the approval of all members with consent being received each year in respect of the previous financial year. The abridged accounts also have to continue to satisfy the criteria to present a true and fair picture of the company.
Micro-entities have the option to submit full, abridged, or micro-entity accounts. Micro-entity submissions can simply consist of a balance sheet prepared in accordance with micro-entity regulations although the option is available to submit directors reports and/or profit and loss account if the company decides to do so. In order to qualify as a micro-entity, companies must satisfy at least two out of three criteria, namely;
- turnover no more than £632,000
- balance sheet total no more than £316,000
- average number of employees no more than ten
With the regulations changing, companies would do well to take advice in respect of the new criteria before deciding which level of accounts to prepare and submit. When doing so it’s important to remember that accounts aren’t simply a statutory number-crunching exercise, but form a vital part of the dialogue between an organisation and its investors.