Access to information held about any of the 3.6 million companies at Companies House has become effortless over recent years and generally can be accessed free of charge, within a few minutes on any smart device. Following the introduction of the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 (Statutory Instrument 2015/980), the financial information that will be available at Companies House is changing.
Under the new regulations however, small companies (excluding micro entities) registered in the United Kingdom no longer have the option of filing abbreviated accounts at Companies House. For those entities abbreviated accounts have been abolished.
The regulations will be mandatory for accounting periods beginning on, or after 1 January 2016 although early adoption is permitted, and some local companies are already taking advantage of the new regime.
The new regulations introduce the principle of “file what you prepare”, so, from the above date, a small company may prepare and file full accounts; or 2) prepare and file “abridged” accounts; or 3) prepare and file “filleted” accounts.
Small companies have always had the option to file full statutory accounts, instead of availing of any relevant exemptions available. It is unlikely that this will be the preferred option for many businesses, as it may involve lengthy disclosures and more detailed financial statements.
Abridged accounts are a new concept introduced by the new regulations. In this context, abridged accounts permit the profit and loss account to start at the “gross profit/loss” line, and also reduces the analysis required on the face of the balance sheet. In order to prepare and file abridged accounts, all members must approve the abridgement and this fact must be stated on the balance sheet. The directors will need to obtain this consent every year. This option is not available to charitable companies.
Filleted accounts are likely to be the most popular option for small companies going forward, due to the similarity to the former abbreviated accounts. Filleted accounts use an exemption contained within section 444(1) of the Companies Act 2006, and permit the exclusion of the directors’ report and the profit and loss account from the accounts filed. The balance sheet must state that this exemption is being utilised. There is also a provision within section 444 of the Act that also permits the exclusion of the audit report for those small companies who are audited, provided that certain disclosures are made elsewhere in the financial statements.
Of perhaps greater significance is the fact that the new regulations have increased the small company thresholds, meaning more companies will be able to avail of the above. A company will qualify as small if it meets two of the three following thresholds:
- turnover £10.2m; total assets;
- £5.1m; and
- employee numbers 50.
The Government announced in 2016 that the audit threshold will also increase, to retain the alignment with the small company definition. The increased audit threshold is not available for early adoption, but will come into effect for periods beginning on or after 1 January 2016.