Changes for small and medium size companies

If you are a small or medium size company, there are some upcoming changes that could impact you. And, unusually for legislative updates, they may be welcome changes.

The company size thresholds are expected to change

For accounting periods starting on or after 1 October 2024, the government intends to implement changes to the company size thresholds.

For Micro-entities, the turnover threshold is expected to increase to not more than £1m from the current level of £632k.

The following increases to the small company thresholds are expected:

• Turnover will increase to not more than £15m, an increase from £10.2m.
• The balance sheet total will increase to not more than £7.5m, an increase from £5.1m.
• The number of employees will remain at no more than 50.

For medium-size companies, the thresholds are expected to be:

• Turnover will increase to no more than £54m, an increase from £36m.
• The balance sheet total will increase to not more than £27m, an increase from £18m.
• The number of employees will remain at no more than 250 (however, there is a planned consultation later this year to look at increasing this to 500).

As a starting point, the company needs to meet two out of the three thresholds.

However, if the company does meet the thresholds, it is not necessarily an automatic determination of size - It does depend on the position over the last two periods.

What does this mean?

In short, companies could drop down a size.

The two key implications for companies that would now qualify as small are:

• Eligible to claim reporting and disclosure exemptions available to small companies.
• Eligible to claim exemption from the requirement to have an audit.

The second implication is potentially of particular interest to those companies that have marginally breached the small company thresholds to date.

The work that is required under auditing standards is not insignificant and appears to only be increasing. Inevitably, the cost of having an audit is increasing.

There are companies that are required to have an audit that would otherwise have no desire to have one. So, this potential cost saving could be welcomed.

Although, I would be doing auditors a disservice if I did not say that there are of course lots of benefits to having an audit.

Other announcements

Companies House have announced changes to small company filing options.

Currently, a small company that prepares abridged or full accounts does not have to file a copy of its profit and loss account and/or the directors’ report with Companies House.

Under the new legislation, all companies will be required to file their profit and loss account.

The option to prepare abridged accounts is also being removed.

The date that these changes will come into effect is not yet certain.