Micro-Entity accounts Implemented 1 December 2013

What are the Changes and who does it apply to?

Micro-entity accounts are a new type of accounts that can be submitted to Companies House from 1 December 2013. They will provide the smallest companies with the opportunity to prepare and publish simplified financial statements (profit & loss account; and balance sheet) if they wish.

These accounts can be filed with Companies House on paper, WebFiling or Software Filing, and apply to financial years ending on, or after, 30 September 2013.

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

Why have these regulations been introduced?

  • In February 2012 the European Council formally adopted into EU law a set of exemptions for micro-entities from the accounting requirements of the 4th and 7th Directives. The objective was to reduce the administrative burden for these companies. In order to introduce these exemptions in the UK.
  • It excludes additional types of entity, most notably charities and LLPs. Other entities excluded are investment undertakings, financial holding and insurance undertakings, credit institutions, qualifying partnerships, and overseas companies.
  • It is worth keeping in mind that the regulations are optional for eligible companies. The directors of a micro-entity may therefore simply continue preparing accounts under the existing financial reporting regime

What are the main features of the micro-entity regulations?

  • A simpler balance sheet and profit and loss account. There are two formats for the balance sheet and one format for the profit and loss account. These are set out in the regulations
  • A micro-entity is still required to prepare a directors’ report, applying the requirements for a small company’s directors’ report and the associated small company exemptions.
  • No notes to the accounts are required. But the company must provide details of any advances, credit and guarantees with directors and details of any other charges, contingent liabilities, capital commitments, other additional guarantees and/or certain other financial commitments should be disclosed at the foot of the balance sheet.

The information required in micro-entity accounts is referred to in the regulations as the ‘minimum accounting items’. On a technical issue, a micro-entity is permitted to ignore any provision of an accounting standard which would require additional information to these minimum accounting items, including any additional information on the minimum accounting items themselves. The micro-entity can choose to disclose information.

Our comments

The will greatly simplify the reporting for smaller companies falling into the micro entity requirements. There are approximately 1.56 million micro entities in the UK compared to a total number of companies registered of 2.8 million

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Author: Jane Samuel

Jane Samuel MAAT has over 30 years experience of working in Public Practice.

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