Micro-entity accounts: all you need to know | unbiased.co.uk (2024)

A micro-entity (also called micro company) is the name for a very small, private limited company.

If you’re the director of a micro-entity, you can save time on preparing and filing your accounts by submitting micro-entity accounts with Companies House.

Micro-entity accounts are a simplified format containing all the information that’s required in all statutory accounts. However, they’re not always the best option to choose.

What are micro-entity accounts?

Although all companies are required to submit a Company Tax Return to HMRC, small companies have options when it comes to their statutory accounts.

If you’re looking to save time and money, you can submit them in a simplified format known as a ‘micro-entity account’.

The Companies Act 2006 classes a limited company as a micro-entity if it meets two of the three conditions during the financial year in question.

A company must not have more than one of the following:

• An annual turnover of more than £632,000

• A balance sheet total of more than £316,000

• An average of more than 10 employees throughout the year

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Thanks to The Small Companies (Micro Entities’ Accounts) Regulations 2013, micro companies are exempt from some of the financial reporting requirements when preparing their year-end Companies Act accounts.

Some businesses cannot apply the exemptions of the micro-entities regime, including:

• Not-for-profits

• Public limited companies

• Limited liability partnerships (LLPs)

• Investment undertakings (which look after a collective pool of investor assets)

• Financial institutions (such as banks)

• Subsidiaries of larger parent companies that are accounted for in the group’s accounts

This new micro-entity regime was introduced to make sure that the smallest companies in the UK weren’t subject to the same time-consuming requirements as large companies.

Should I file micro company accounts?

There are benefits and drawbacks to filing micro-entity accounts.

On one hand, you will save time and stress if you choose to file micro-entity, as you won’t need to include documents such as a director’s report.

If your limited company is just you and a staff member or two, it’s likely you don’t have shareholders who need to be kept updated about your performance.

Your year-end accounts may simply be a compliance hurdle that you’d like to get out of the way as quickly as possible.

You may also choose to file ‘filleted’ accounts with Companies House, which can reduce how much information is publicly available about your company’s performance.

This can stop competitors getting information about your financial situation or simply keep your information private.

However, if you’re actively seeking new shareholder buy-in or funding that will allow your company to grow, micro-entity accounts may hold you back.

Without an in-depth financial picture of your operations, you could find it harder to secure further investment or loans that make expansion possible.

How do I prepare micro-entity accounts?

If you’d like to prepare micro-entity accounts, you’ll need:

• An abridged (starting from gross profit rather than turnover)

• An abridged balance sheet (minus main heading such as debtors, creditors etc.)

• An auditor’s report (unless you choose to claim the Small Companies audit exemption)

Unlike abridged accounts that small businesses can file, you won’t need to include a director’s report.

Many micro-entities are also exempt from being audited, so you will not need to file an auditor’s report.

You can also choose to fillet your accounts for the public record to reduce how much information is publicly available.

In this case, you’ll only need file a balance sheet with footnotes. Make sure you accompany it with a statement that the profit and loss account hasn’t been filed, and that your annual accounts have been delivered in accordance with the Small Companies’ regime.

Even if you do file micro-entity accounts, it’s important that you privately provide as much information as you can to your company’s members and shareholders.

They have invested time and or money into your business and have a right to know how it is performing.

How do I file micro-entity accounts?

Micro companies have various options for filing their micro-entity accounts, including the online Companies House WebFiling service.

If you’d like to file your accounts with HMRC and Companies House at the same time, you can use the Company Accounts and Tax Online (CATO) service too.

You’ll need your Government Gateway details and a Companies House company authentication code to do so. If it’s easier, you can also file your accounts on paper and post them in, but it’s crucial you allow plenty of extra time.

Should I use an accountant to file micro company accounts?

Filing micro-entity accounts can be complex, as you’ll need to make sure your accounts meet the FRS 105 Financial Reporting Standard.

Even if you’re familiar with preparing a profit and loss account and balance sheet, you might not understand what’s required in the abridged versions.

To make sure you stay compliant, and to save you a lot of time and hassle, it’s best to use an accountant to file micro company accounts.

How much does it cost to get an accountant for micro company accounts?

Most accountants’ fees are determined by the size of your company, as well as other factors like location and the complexity of your accounts, meaning costs for a micro company will be at the lower end of the scale.

If your turnover is between £20,000 and £300,000, you should expect to pay between £150 to £600 if you’d like an accountant to do your accounts. Other services such as VAT returns can add another £100 to £200 to your bill.

It’s important to note these figures are guidelines – you’ll need to speak to accountants in your areas to get a sense of how much your accounts will cost. Find out more about what accountants cost.