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Accounting and Audit Exemptions For Small Companies in the UK
Accounting and Audit Exemptions For Small Companies in the UKBy Terry Cartwright
To qualify for being able to file shortened accounts a small company should satisfy at least two of three conditions. The three exemption conditions prior to April 2008 were that annual turnover is less than 5.6 million pounds, balance sheet total is less than 2.8 million pounds and the average number of employees is less than 50.
Where the financial year started after April 2008 the parameters increased to, annual turnover less than 6.5 million pounds, balance sheet total less than 3.26 million pounds and average number of employees less than 50.
Medium sized companies may also submit abbreviated accounts and the parameters to be classified as a medium sized company are significantly higher than those for a small company. For example for financial years starting from April 2008 two of the three qualifying conditions for a medium sized company to be satisfied were increased to sales turnover of under 25.9 million pounds, balance sheet total under 12.9 million pounds and average number of employees less than 250.
When a small company satisfies the audit exemption parameters it can maintain that audit exemption for a full financial year afterwards even if the parameters were exceed in that following financial year.
There are benefits in submitting abbreviated accounts as simpler and easier accounting records can be maintained reducing time spent on accountancy work. In addition although potential suppliers and financial institutions may require details of the year end financial accounts it is acceptable not to publish full details.
The main differences that can be produced under the banner of abbreviated accounts basically mean that a small company does not have to include a full balance sheet, profit and loss account or directors report which would normally be required by Companies House.
The small company is still required to submit a shortened balance sheet together with notes that explain the year end balances shown in the balance sheet. Under the audit exemption rules the year end accounts for a small company do not have to include an auditors report. When an auditor has prepared the accounts and submits a special audit report that report should state that in the auditors opinionthe abbreviated accounts are being submitted in accordance with the suitable section of the Companies Act.
Small companies must include a statement in the balance sheet that the year end accounts have been prepared in accordance with the special provisions contained in Part V11 of the Companies Act 1985. For financial periods starting after 5 April 2008 the accounts must be prepared in accordance with the Companies Act 2006 and include a statement that the special provisions applicable to small companies have been adopted
The statements to accompany the balance sheet of a small company submitting abbreviated audit exempt accounts are that:
The company was entitled to audit exemption for the financial year under the relevant section of the Companies Act 2006.
The shareholders have not required the company to obtain an audit.
The company directors acknowledge their responsibility for preparing accounts that comply with section 221 of the Companies Act 2006.
The company directors acknowledge their responsibility for preparing accounts which give a true and fair view of the state of affairs of the company and the profit and loss for the year.
The accounts have been prepared in accordance with the special provisions of the Companies Act relating to small companies
The rules on audit exemption apply not only to the year end accounts supplied to companies house however also those supplied to HMRC. This enables the small company to submit the short version of the corporation tax return, CT600, with the abbreviated accounts for tax purposes.
Terry Cartwright is a qualified accountant in the UK and producing Accounting and Audit Exemptions packages for small limited companies in accordance with Companies House submission requirements.
,Common Professional Accountancy Services in the UK
Common Professional Accountancy Services in the UKBy Oladotun Ogunsulire
As a business operator either as sole trader or limited company, you will probable require financial services which are greatest delivered by a firm of accountants. The services of independent accountants will differ in many aspects from what you'd expect from an accountant on your payroll. In this article, we'll explore a few of the services for which you might retain an accountancy firm.
Book keeping services: This refers to the recording of your day to day trading transactions. Thus all your purchase invoices, receipts for expenses paid, sales invoices, credit notes received and issued, delivery charges and delivery notes, cash received from debtors and cash sales are entered into your accounting records, often referred to as your "books". In this day and age, your "books" would usually be a software package, and the records would be entered using the fundamental double entry system and other accounting precepts.
A lot of small businesses and most medium to large businesses have employees who handle the book keeping internally, however, for the sole trader or small business , it can be convenient to have this function fulfilled by their accountants. This does have the effect of freeing up time for the business to focus on its core activities. Plus, it should result in excellent record keeping as the accountancy records are being kept by professionals.
Management accounts: These are usually extracted from the accountancy records that have been produced by the book keeping process. management accounts are generally required by the management of a business to provided a financial overview of the performance of the business over a fixed period of time. Monthly, quarterly and annual management accounts are fairly standard. Management would usually receive a Profit and Loss account, and a balance sheet statement together with profitability ratios and perhaps budget deviation reports if a budget had been setup during or before the accounting period being reviewed
Financial accounts: The financial accounts for companies must comply with all the relevant laws, in particular, companies act 2006 . A requirement of the Companies act is that the accounts should follow generally accepted accounting practices (GAAP).The company's retained accountant would either prepare the GAAP accounts or advise the directors in preparation of the said accounts. Naturally, the nature of the service would depend on the contract for services signed by both parties. Note that whoever prepares the accounts, the responsibility for the accounts lies with the company's directors. The financial accounts are viewed by the management, the shareholders, the bankers and creditors, potential investors, and other interested 3rd parties. The financial accounts will also be submitted to the relevant tax office and for companies, to companies house. In the United Kingdom , companies house is a government agency involved in the monitoring and control ofincorporated businesses in the UK. Accounts submitted to companies house are available for public viewing. The accounts for sole traders and partnerships are not governed by companies act however would be used for tax returns .
Audit: For certain classes of company depending on their size and industry, an audit report is required each year that the company meets the audit criteria plus ancillary years as determined by the secretary of state. Essentially, an audit report requires the reporting accountant to express an opinion on whether the accounts of the company show "a true and fair view" of the affairs of the company . It would be well beyond the scope of this or any other short article to discuss in detail what can be one of the most contentious documents in the business world today.
Corporation tax, Personal tax, VAT: Corporation tax is payable on company taxes each year and handling these matters as an agent on behalf of the business is one of the most important services accountants offer.Personal taxes being taxes collected on the income of individuals can be managed on behalf of companies and individuals by firms of accountants. Value added tax (VAT) is usually managed by a business as part of its on going book keeping procedure. Where the external accountants are also the book keepers, they would generally deal with the management of VAT as an agent of the business.
Company secretarial; The operation of an incorporated business requires that a number of statutory matters are executed each year. These include general meetings , directors meetings , submission of company accounts, submissions of other documents such the annual return, appointments of directors , notification of registered trading address. For smaller businesses , accountants generally handle the company secretarial duties.
There are several other services a firm of accountants can offer, and these include management consultancy, corporate finance, general financial advice amongst others. In business , you will come to a point when you know there is a need for professional business advice, an accountant should be high on your list of persons to call.
About me I an accountant by profession, a web entrepreneur and developer at home, graduated as a Mechanical Engineer many years ago. Since graduation, I've worked in a many areas, and now having wanted to be a writer for ages, I've found a way to get a foot in, publish my works for the world to see :)
Two of my websites are
http://www.terranlink.co.uk