Filleted accounts, full accounts and micro-entities a round up

Steve Collings explains the updated small company filing requirements;

As the new financial reporting regime begins to become more established in the UK, there appears to still be some confusion concerning the filing requirements for small and micro-entities.

The filing obligations for small companies are contained in s444 of the Companies Act 2006 ‘Filing obligations of companies subject to small companies regime’. This section was significantly overhauled by virtue of ‘The Companies, Partnerships and Groups (Accounts and Reports) Regulations’ 2015 SI 2015/980, which abolished the concept of abbreviated financial statements. The amended s444 took mandatory effect for periods starting on or after 1 January 2016.

Section 444(1) states that:

‘The directors of a company subject to the small companies regime—

(a) must deliver to the registrar for each financial year a copy of the balance sheet drawn up as at the last day of that year, and

(b) may also deliver to the registrar—

(i) a copy of the company’s profit and loss account for that year, and

(ii) a copy of the directors’ report for that year.’



So what does this mean in practice?

Prior to the amendments made by SI 2015/980, s444(1)(a) said that a small company must file a copy of ‘a’ balance sheet drawn up as at the last day of the financial year. The amended s444(1)(a) states that a small company must deliver a copy of ‘the’ balance sheet drawn up as at the last day of the financial year. This means that the balance sheet that must be filed with Companies House is the one that is prepared for the shareholders rather than one adapted for filing purposes.

In addition, a small company can choose to file the profit and loss account and a copy of the directors’ report if they wish. In practice, few small companies choose to file the profit and loss account because this effectively may give away sensitive information.

 

Filleted financial statements

The term ‘filleted’ financial statements is not a term that will be found in the Companies Act. It is a term coined by the accountancy profession to describe the financial statements of a small company which are lodged with Companies House.

A small company can prepare full financial statements under FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland using Section 1A Small Entities. These full financial statements will then be sent to the shareholders and HM Revenue and Customs in much the same way as they were under the previous FRSSE.

However, when it comes to filing those financial statements with Companies House, the small company can choose to file filleted accounts.

Filleted financial statements are the full financial statements, but without the directors’ report, profit and loss account and any notes related to the profit and loss account. In other words, the directors’ report, profit and loss account and notes relating to the profit and loss account have been ‘filleted out’ for filing purposes. Under the new small companies reporting regime, the most likely note that will filter through into the full financial statements relating to the profit and loss account is exceptional items.

Therefore, the Registrar receives the balance sheet (as prepared for the shareholders) together with the notes relating to the balance sheet. If the balance sheet has been abridged, the Registrar receives the abridged balance sheet and the notes (although fewer notes will be contained in an abridged balance sheet as items preceded by Arabic numerals in the statutory balance sheet formats are not disclosed in an abridged balance sheet). These accounts must be filed to the Registrar within nine months of the accounting reference date or penalties will be levied.

Take care with the employee numbers disclosure. Under s411 of the Companies Act 2006, a small company must disclose the average number of persons employed by the company in the financial year. This is not a profit and loss account (ie payroll) disclosure. The disclosure refers to the average number of persons which the business has employed during the year and hence should be disclosed in the filleted financial statements. It is worth checking the accounts which are going to be submitted to Companies House to ensure this disclosure is contained as the accounts could be rejected if it is


Micro-entities

Micro-entities are still required to file their accounts with the Registrar. As with small companies, micro-entities need only file the balance sheet with the notes situated at the foot of the balance sheet. The profit and loss account need not be filed and there will not be a directors’ report for a micro-entity as this was repealed for periods starting on or after 1 January 2016.

  • Steve Collings is a Partner at LWA Chartered Certified Accountants and Statutory Auditors

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