Filing options for small companies
Although the new filing regime for small companies came into effect in 2016 it continues to be an area that generates questions.
In particular, questions on the options available, and the information and/or statements required, for small company accounts filed at Companies House.
In this article I will briefly recap on some of the key aspects of the small companies filing regime, including some of the areas that appear to have caused problems in practice.
File what you prepare
The filing regime for small companies operates under a ‘file what you prepare’ model, meaning that the accounts filed at Companies House are the same as those prepared for members.
So if a small company has taken up the option to prepare for its members an abridged balance sheet, abridged profit and loss account, or both, it is this ‘abridged’ version that must be filed at Companies House. Similarly, if a small company has prepared ‘full’ accounts for its members, that is the version that must be filed at Companies House.
Filing abridged accounts
When a small company chooses to abridge all or part of its accounts, it must deliver to Companies House a statement that all the members have consented to the abridgment. In practice, this requirement can be met by including a note in the filed accounts to state that consent has been received.
Filing ‘filleted’ accounts
Whether or not a small company chooses to prepare and file full or abridged accounts, it has the option not to file the profit and loss account and/or the directors’ report ie, to file ‘filleted’ accounts.
If taking up this option, the balance sheet must contain a statement that the accounts have been delivered in accordance with the small companies regime. Additionally, if the small company chooses not to file the profit and loss account, the balance sheet delivered to Companies House must disclose that fact.
This should not be confused with the statement required on the balance sheet to note when the accounts have been prepared in accordance with the provisions available to small companies. It is worth noting that an eligible small company can choose not to prepare accounts in accordance with the small companies regime, but still take up the option to file its accounts in accordance with the small companies regime. Care is needed therefore to ensure the appropriate statements are included in the accounts filed at Companies House.
Notes to the accounts
If a small company chooses not to file the profit and loss account there is no need to file any notes that relate solely to that statement. The only mandatory note that falls into this category under the small companies regime relates to ‘the amount and size of any individual items of income or expense of exceptional size or incidence’. This note can therefore be excluded from the accounts filed at Companies House.
Any other notes that are included in the accounts in order to provide a true and fair view may also be omitted from the accounts filed at Companies House if they relate directly to a profit and loss account item.
There has been some debate about whether the ‘employee numbers’ note is or isn’t a profit and loss account note and whether it can or can’t be omitted when the profit and loss account is not filed at Companies House. The Financial Reporting Faculty’s view is that the ‘employee number’ note is not a profit and loss account note since it does not relate to a specific profit and loss line item.
Whether or not a small company is audited is also important in this context. Under the rules, a small company that is audited is required to file its audit report only when it has chosen to file a copy of the profit and loss account. A small company that does not file its profit and loss accounts is not required to file its audit report. Instead, the notes to the balance sheet filed at Companies House must disclose certain details about the audit.
For further information on the filing options for small companies see the Financial Reporting Faculty’s Small company filing options FAQs. FAQs are also available outlining the filing options for micro-entities and LLPs.