Tax Consultant / July 25, 2017
From the accounting periods 2016/2017 the abbreviated accounts for small businesses will be abolished. What are the options?Two year ago Financial Reporting Standards for, Entities changed in line with the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015. This has created a lot of confusion about new requirements, the biggest ones being new thresholds for qualifying as a small company, changes to dis, closures required in small company accounts, accounts formats and different filing obligations.
We will focus here mainly on the replacement of abbreviated accounts. In the past, small businesses have to produce two sets of statutory accounts: the abbreviated accounts for the Companies House and the full set of accounts HMRC.
However, for accounting periods that start on or after 1 January 2016, small businesses will only need one set of accounts. They have some options:
– The abridged accounts
– Full Accounts
– ‘Filleted’ accounts, or
– Micro-entity accounts
Under the new regime, a company is classed as small if:
– The number of employees is not more than 50 and
– The turnover is not more than £10.2m (previously £6.5), and/or
– A balance sheet is not more than £5.1m (previously £3.26m)
To qualify a small company only needs to meet two of the three criteria.
What to include?
Abridged accounts work as both the public accounts and the shareholder accounts. However, companies need to ask for permission from their shareholders to file abridged accounts.
An abridged balance sheet only includes line items preceded by letters (for example, fixed assets) and Roman numerals (debtors), not those preceded by Arabic numbers (other receivables). The abridged accounts combine some items under one heading. For example, profit and loss account may include turnover, the cost of sales, and other operating income and gross profit and loss. Companies have the choice to abridge both the balance sheet and profit and loss account, or just one of these items.
If an annual turnover of the company is £632,000 or less, balance sheet total is £316,000 or less or the company employ 10 employees or fewer, they can qualify as a micro-entity company, providing two of the above three conditions are met.
These companies can file micro-entity accounts, which include a balance sheet, with a small number of notice. Moreover, small and micro-entity companies can omit the profit and loss or the director’s report. This is called a Filleted account. If a company chooses to do so, the balance sheet must mention that the company chose not to include its profit and loss or director’s report, and contain a statement that the accounts have been prepared in accordance with the small companies regime.
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