Micro Entities

Will Rogers

"Income tax has made liars out of more Americans than golf."

What is a Micro-Entity?

UK company law has introduced a new sub-classification of small companies - known as a ‘micro-entity’. This followed an EU initiative to reduce costs for small and medium-size enterprises.

Micro-entity reporting exemptions are available to the smallest companies.

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Do you need help with any of the issues discussed on this page?

If you need assistance with UK tax filing we can complete and file a return for you with all tax calculations taken care of.

We can agree a fixed fee in advance.

What qualifies as a Micro-Entity?

To file accounts as a micro-entity, a company must meet at least two of the three following conditions:

➣ turnover not more than £632,000

➣ balance sheet total not more than £316,000

➣ average number of employees not more than 10

Are there any exclusions?

Yes. if a company is a PLC, a company carrying on an insurance market activity, an ineligible financial services company or a member of an ineligible group, it will fail to qualify for micro entity reporting.

In groups of companies, micro entity reporting is not available where the company is a parent company preparing group accounts or where a subsidiary that is included in consolidated group accounts.

Investment companies, financial holding companies, credit institutions, insurance undertakings and charities are also ineligible.

What are the differences in reporting?

The filing requirements remain the same as for small companies.

The accounts are presumed to give a true and fair view. The accounts must be prepared in accordance with generally accepted accounting principles and practice.

Will Micro Entity reporting reduce accountant fees?

Accountants are required to undertake the same work they have always had to do in order to comply with the Companies Act requirements, accounting and financial standards and the requirements of professional and governing bodies.

The only difference is in the presentation of the accounts which is simplified.

HM Revenue & Customs still require accounts information in a full and detailed format.

If there is no cost saving, what is the benefit?

When the concept of micro-entities was first introduced, the Department for Business Innovation & Skills said :

“A key feature of the Micros Directive is that it provides the smallest companies with the opportunity to prepare and publish simplified financial statements (profit and loss account; and balance sheet) if they wish. A significant number of UK companies may benefit from this exemption.”

So, a company can choose to present public information in a slightly simplified manner. That’s it. What the actual benefit might be is for the company to decide.

Is there a tax advantage?

In some cases preparing micro-entity accounts can lead to a change in taxable profit if the accounting policies applied are different from those normally required. This could lead to a different taxable profit for corporation tax.

Most micro-entities will not have any tax implications.