Service: Business strategy 

Topic: Coronavirus 

Exploring the UK entity size classifications

By Matthew Selfe

11 Nov 2021

Unlike many countries around the world, all UK companies and LLPs are required to file financial statements on the public record. These can be viewed online via the companies’ house website.

The level of detail that is required in these filings is dependent on the size of the company. 

The below table sets out the size classifications, thresholds, and high-level filing differences.

Size classification is based on three criteria (Annual turnover, gross assets at the balance sheet date, and the average number of employees). An entity cannot exceed 2 out of the 3 thresholds listed below to fall within a certain classification.

Size classification Annual turnover  

Gross assets at balance sheet date

Average number of employees Stand alone audit required P&L publicly filed Directors reports publicly filed 

Strategic report required  

Micro-entity  £632,000 £316,000 10 No No Not required No
Small  £10.12m £5.1m 50 No No No No
Medium  £36m £18m 100 Yes Yes Yes Yes

 

Whilst the above table provides a summary, there are a number of points to note, which I have set out below. 

Key points to note

Two-year rule
The thresholds must be breached for 2 consecutive years for the classification to be applied. For example, if an entity is small for the year ended 31 December 2020, it will be classified as small for the year ended 31 December 2021.

Ineligible entities
Some entities are ineligible from utilizing the above regimes and must file large company accounts, such examples include PLCs and FCA registered businesses

Ineligible groups
If an entity is part of an ineligible group it will not be able to utilize the above classification and must file large company accounts. A group is ineligible is any of its members are deemed to be ineligible. 

Annual turnover
Turnover must be annualized, this could prove a useful tool for the first year of incorporation, particularly given the two-year rule and the potential to change the year end.

Micro entity exclusions
The following entities are prohibited from using the micro-entity regime;

  • LLPs
  • Charitable companies
  • Investment undertakings
  • Financial institutions
  • Subsidiaries that are included within the consolidated financial statements of a parent company

Dormant accounts
For companies that have not trade during the year and meet the dormancy test, dormant financial statements can be filed at companies house. Dormant entities are those defined as not having had significant transactions in the year

FRS 105
An entity that falls within the micro-entity regime can take advantage of Financial Reporting Standard 105 (’’FRS105’’). This is a reduced disclosure framework designed specifically for small entities. 

If you want to discuss the above or find out more please do not hesitate to contact us or check out Gerald Edelman’s Business Advisory services. 

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