Corporate law

Micro-entities financial reporting requirements

The small companies "Micro-Entities Accounts" Regulations 2013 introduced exemptions from certain financial reporting requirements for very small companies that prepare Companies Act individual accounts.

For the smallest of companies, the burden to provide detailed financial information was considered disproportionate. The regulations provide the smallest companies with the opportunity to prepare and publish simplified financial statements, easing that burden. Reporting requirements for companies were in part in designed to address the need for the management to provide information to the owner. Arguably, in the case of micro-entities, there is often no such separation of control because in many cases, the companies are effectively owner managed.

What is a micro-entity?

There are three size classifications of company to consider when preparing accounts, these are small, medium and large. Within the small company classification there is now a sub-set called a "micro-entity".

To be a micro-entity, a company must meet at least two of the following conditions:-

  • Turnover must not be more than £632,000.
  • The balance sheet total must not be more than £316,000.
  • The average number of employees must be not more than 10.

Are there any exceptions?

The regulations confirm that 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 liability partnership.
  • 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 of The Companies Act 2006.
  • A charitable company.
  • A company that is excluded from the small companies regime under Section 384 Companies Act 2006, or is excluded from being treated as a micro-entity under Section 384B of The Companies Act 2006.
  • New accounts filing

A micro-entity is required to prepare accounts that contain the following elements:

  1. A balance sheet that complies with one of the specified formats given in the relevant regulations, along with any footnotes.
  2. A director’s report.
  3. A profit and loss account that complies with the specified format given in the relevant regulations.
  4. An auditor’s report, unless a company is claiming exemption from audit as a small company.
  5. Any notes to the accounts.

Micro-entities can prepare and file their balance sheets with a reduced set of information. 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 director’s report or profit and loss account at Companies House.

Companies House Filing

A micro-entity must deliver to the Registrar for each financial year a copy of the balance sheet drawn up as at the last day of that year, and may also deliver to the Registrar the following:-

  1. A copy of the profit and loss account for that year (if not exempt);
  2. Copies of the director’s report for that year (if not exempt);
  3. An auditor’s report (if not exempt);
  4. Any notes to the accounts.

As an added requirement, 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 Micro-Entity Provisions. The statement should appear in the original Accounts as well as the copy sent to Companies House.

If the company has opted not to file a Director’s Report and/or a Profit and Loss Account then a statement should also appear on the Balance Sheet sent to Companies House that the accounts have been delivered in accordance with the provisions applicable to companies subject to a small companies regime.

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