Technical helpsheet issued to help members make their assessment as to whether a (non-dormant) UK subsidiary of an overseas parent is entitled to audit exemption under the Companies Act 2006.
This helpsheet has been issued by ICAEW’s Technical Advisory Service to help members make their assessment as to whether a (non-dormant) UK subsidiary of an overseas parent is entitled to audit exemption under the Companies Act 2006.
Members may also wish to refer to the following related helpsheets and guidance:
Entitlement to audit exemption
It is fairly common for small UK companies to have parent companies which are incorporated overseas. Assuming the UK company is not required by its articles to be audited, and its members have not requested an audit under s476 of the Companies Act 2006, there are two potential routes to audit exemption.
Small part of a small group exemption
If the company is small in its own right, then as long as the group qualifies as a small group (see Is a company or group small?) and was not at any time within the year an ineligible group (see Ineligible companies and groups) then it may take advantage of the small companies audit exemption conferred by s477 of the Companies Act 2006.
When assessing the size of the group for this purpose, it is the size of the entire group of which it is a member which should be considered (the Companies Act does not differentiate between the geographical locations of group members). This involves looking at those above and below itself in the group as well as those in different branches of the group structure.
More details on this audit exemption can be found in the helpsheet Is an audit required for a company?
Audit exemption by parent guarantee
Where the company is itself a subsidiary company and its parent is established under the law of a UK or EEA state, then the company may wish to consider audit exemption by parent guarantee, the requirements for which are outlined in s479A of the Companies Act 2006.
There are a large number of requirements to meet in order to claim this audit exemption. For example, the parent must prepare consolidated, audited accounts which must be filed at Companies House and all members of the company must agree to the exemption in respect of the financial year in question. Where the consolidated accounts are prepared in a foreign language, a certified translation must also be filed.
ICAEW TECH 06/20 BL Exemption from audit by parent guarantee provides further details on the requirements and answers FAQs on the topic.
For periods commencing after the end of the transition period (31 December 2020), the exemption under s479A of the Companies Act 2006 will only be available with a UK parent guarantee.
If in doubt seek advice
ICAEW members, affiliates, ICAEW students and staff in eligible firms with member firm access can discuss their specific situation with the Technical Advisory Service on +44 (0)1908 248 250 or via webchat.
© ICAEW 2023 All rights reserved.
ICAEW cannot accept responsibility for any person acting or refraining to act as a result of any material contained in this helpsheet. This helpsheet is designed to alert members to an important issue of general application. It is not intended to be a definitive statement covering all aspects but is a brief comment on a specific point.
ICAEW members have permission to use and reproduce this helpsheet on the following conditions:
- This permission is strictly limited to ICAEW members only who are using the helpsheet for guidance only.
- The helpsheet is to be reproduced for personal, non-commercial use only and is not for re-distribution.
For further details members are invited to telephone the Technical Advisory Service T +44 (0)1908 248250. The Technical Advisory Service comprises the technical enquiries, ethics advice, anti-money laundering and fraud helplines. For further details visit icaew.com/tas.
- 01 Jan 2016 (11: 30 AM GMT)
- First published
- 17 Mar 2021 (11: 30 AM GMT)
- Changelog created, helpsheet converted to new template
- 17 Mar 2021 (11: 31 AM GMT)
- Minor update as a result of Brexit and Companies Act amendments.
- 04 Nov 2021 (12: 00 PM GMT)
- Helpsheet reviewed - no changes.