Changes to UK company size thresholds
The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 has been laid this week. This will mean that new company size thresholds and rules come into force for financial years beginning on or after 6 April 2025 which affect company reporting, audit and some tax requirements applicable to UK businesses.
These changes reflect the eventual implementation of relaxed company size financial thresholds and reporting requirements as trailed by the previous Government, albeit with a slightly later implementation timetable and without the early adoption options found in Irish Law’s equivalent changes.
What’s in these regulations?
These regulations make a number of changes to reduce complexity and reporting requirements, especially for smaller businesses, more of whom will be able to take advantage of micro and small companies exemptions going forward. Changes include:
Increasing micro, small and medium-size financial thresholds, as follows:
Micro-entity thresholds increase to:
- Turnover: not more than £1m (from £0.632m).
- Balance sheet total (gross assets): not more than £0.5m (from £0.316m).
- Number of employees (average): remains at not more than 10.
- It is estimated that 113,000 companies and LLPs will move from small to micro as a result of these changes.
Small thresholds increase to:
- Turnover: not more than £15m (from £10.2m).
- Balance sheet total (gross assets): not more than £7.5m (from £5.1m).
- Number of employees (average): remains at not more than 50.
- Gross thresholds (for group/parent size assessment purposes) move to Turnover of £18m, Balance sheet total of £9m.
- It is estimated that 14,000 companies and LLPs will move from medium-sized to small as a result of these changes.
Medium thresholds increase to:
- Turnover: not more than £54m (from £36m).
- Balance sheet total (gross assets): not more than £27m (from £18m).
- Number of employees (average): remains at not more than 250.
- Gross thresholds (for group/parent size assessment purposes) move to Turnover of £64m, Balance sheet total of £32m.
- It is estimated that 6,000 companies and LLPs will move from large to medium-sized as a result of these changes.
These thresholds apply to narrative, financial reporting and audit requirements (and also impact the application of the off-payroll working tax rules, under Part 2 of the Income Tax (Earnings and Pensions) Act 2003, commonly referred to as IR35, with up to 10,000 fall out of scope of off-payroll rules (impacting 20,000 individual intermediaries).
Unlike in the Republic of Ireland, there are no early adoption options, only the normal provision that allows you to use the new thresholds for the “two-year-rule” assessment in the first year that the updated thresholds are effective.
Reducing the information companies need to include in a Directors Report
Small companies: the requirement to include information on employment of disabled persons removed.
Large and medium companies: requirements to include information on financial instruments, miscellaneous provisions, disclosure on the employment of disabled persons and their engagement with employees, suppliers, customers and others all removed.
We are here to help
If you would like further information about how the amendments to UK GAAP, size thresholds, accounts filing and narrative reporting requirements might impact your business, please contact a member of our specialist team via the form below or your usual Azets advisor.
The information contained within this insight is for guidance only and does not constitute advice which should be sought before taking any action or inaction.