A recap on changes that came into force in 2015.
Statutory Instrument 2015 number 980 came into force on 6 April 2015. This increased the small company thresholds as follows:
| Companies Act 2006 section 382 changes | New limits | Previous limits |
| Turnover not more than | £10.2m | £6.5m |
| Balance sheet total not more than | £5.1m | £3.26m |
| Number of employees not more than | 50 | 50 |
| CA 2006 section 383 changes (parent companies) | ||
| Aggregate turnover not more than | £10.2m (net) | £6.5m (net) |
| Or £12.2m (gross) | Or £7.8m (gross) | |
| Balance sheet total not more than | £5.1m (net) | £3.26m (net) |
| Or £6.1m (gross) | Or £3.9m (gross) | |
| Number of employees | 50 | 50 |
The amendments made by this statutory instrument have effect in relation to:
(a) financial years beginning on or after 1 January 2016, and
(b) a financial year of a company beginning on or after 1 January 2015, but before 1 January 2016, if the directors of the company so decide.
Early adoption of FRS102 1a is:
(a) permitted for accounting periods beginning on or after 1 January 2015 provided that The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 (SI 2015/980) are applied from the same date; and
( b) required if an entity applies The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 (SI 2015/980) to a reporting period beginning before 1 January 2016.
However, the increases in company size were not available for audit exemption purposes for financial years beginning before 1 January 2016.
Transitional provisions
There are transitional rules which effectively allow a company to use the new limits when using the ‘two year rule’ to determine the size of the company in the previous year. As paragraph 2(4) of SI 2015/980 states ‘In determining whether a company or group qualifies as small or medium-sized under section 382(2)(c), 383(3)(d), 465(2) or 466(3) of the Act (qualification in relation to subsequent financial year by reference to circumstances in preceding financial years) in relation to a financial year in relation to which the amendments made by these Regulations have effect, the company or group is to be treated as having qualified as small or medium-sized (as the case may be) in any previous year in which it would have so qualified if amendments to the same effect as the amendments made by these Regulations had effect in relation to that previous year.’
Example
A company prepares accounts to 31 December each year and the results for the previous six years have been as follows:
| Year ended 31 December | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 |
| Turnover (millions) | 9.8 | 8.5 | 7.9 | 7.1 | 6.8 | 6.7 |
| Balance sheet total (millions) | 28 | 27 | 26 | 24 | 23 | 21 |
| Number of employees | 48 | 45 | 44 | 42 | 40 | 37 |
| Category using ‘old’ rules | m | m | m | m | m | m |
| Category using ‘new’ rules | s | s | s | s | s | s |
Where ‘m’ refers to ‘medium in size’ and ‘s’ refers to ‘small in size’.
If the directors so decide they can produce ‘small company accounts’ for the year ended 31 December 2015 and for the year ended 31 December 2016. However, an audit would be required for the year ended 31 December 2015 whereas the company would be audit exempt for the year ended 31 December 2016.
Abridged accounts
Statutory Instrument 2015/980 allows small companies to prepare and file abridged accounts for accounting periods beginning on or after 1 January 2016. Early adoption is permitted for accounting periods beginning on or after 1 January 2015 but before 1 January 2016.
Further details about abridged accounts can be found in this ACCA Technical Factsheet
Abbreviated accounts have been abolished for accounting periods commencing on or after 1 January 2016.
Filing obligations of small companies
The filing obligations are explained in the Companies Act 2006 section 444. Small companies are required to file a balance sheet as at the end of the accounting period. The company may also file (but is not obliged to) a copy of the profit and loss account for that year. The company may also file (but is not obliged to) a copy of the directors’ report for that year.
The balance sheet and/or the profit and loss account can be abridged. Where the balance sheet or profit and loss account is abridged pursuant to paragraph 1A of schedule 1 to the Small Companies and Group (Accounts and Directors’ Report) Regulations (SI 2008/409), the directors must also deliver to the registrar a statement by the company that all the members of the company have consented to the abridgement.
Definition of ‘ineligible group’ has changed
The Companies Act 2006 section 384 (companies excluded from the small companies regime), section 467 (companies excluded from being treated as medium-sized) and section 479B (companies excluded from the subsidiary companies audit exemption) have been changed by SI 2015/980.
Previously these sections said that an ineligible group included any group in which any of its members is ‘a public company’. The term ‘a public company’ was replaced by ‘a traded company’:
(a) in relation to financial years beginning on or after 1 January 2016, and
(b) a financial year of a company beginning on or after 1 January 2015, but before 1 January 2016, if the directors of the company so decide.
Article from ACCA In Practice