The parameters set out in the Companies (Accounts) Act, 1999 for a company qualifying as “small” or “medium” have been amended, with immediate effect.

These parameters are used to determine the accounts required to be filed at Companies House (and which can therefore be accessed by the public).  Also, where a company does not have income liable to assessment for tax under the Income Tax Act, qualifying as a small company may exempt the company from being audited (not in the case of banks, insurance companies and other entities licensed by the Financial Services Commission).

The parameters are now as follows:

Small companies:

• Net turnover – not more than £6.5m (previously £4.8m)
• Aggregate balance sheet total – not more than £3.26m (previously £2.4m)
• Total number of employees – not more than 50 (unchanged)

Medium companies:

• Total turnover – not more than £25.9m (previously £19.2m)
• Aggregate balance sheet total – not more than £12.9m (previously £9.6m)
• Total number of employees – not more than 250 (unchanged)

Essentially, a company must fall within two out of three of the parameters in the financial year in question and the preceding year in order to be classified as small or medium-sized.  If a company exceeds or ceases to exceed the limits of two or more parameters it will continue to qualify for the relevant year unless it occurs in two consecutive years.  For a newly incorporated company the conditions need only be met in its first financial year.

Small companies are required only to file an abridged balance sheet;

Medium-sized companies are required to file full accounts, as for a large company, except that the profit and loss account may be in an abridged format;

Large companies are required to file full accounts, ie, including balance sheet, profit and loss account, note, directors’ report and the auditor’s report.

The ability to file only abbreviated accounts does not in itself mean that the company is not required to prepare and have audited full accounts.

Also amended are the parameters set out in the Companies (Consolidated Accounts) Act, 1999 for a group of companies qualifying as a “small” or “medium” group.  Qualifying as a medium (or small) group may determine whether group accounts are required or not.

The parameters for a medium group are:

• Total turnover – not more than £25.9m net, £31.1m gross (previously £19.2m net, £23.04m gross);
• Aggregate balance sheet total – not more than £12.9m net, £15.5m gross (previously £9.6 net, £11.52m gross);
• Total number of employees – not more than 250 (unchanged)

The same rules concerning two out of three parameters and for two consecutive years, as described above for small/medium/large companies, apply.  “Net” as stated in the above parameters means after consolidation set-offs and adjustments.

There is a legal requirement for limited companies with subsidiaries to prepare consolidated accounts (subject to certain exemptions, eg, if the company is itself a subsidiary of a parent undertaking that meets certain condition)). Small and medium-sized groups need not prepare group accounts, unless they include a listed company, bank or an insurance company.  If advantage is to be taken of this exemption then the auditors must confirm they are so entitled.