When you’re filing small company accounts with Companies House, there are a couple of different options: dormant company accounts, full accounts, micro-entity accounts, and abridged accounts. If you’re a small company or start-up with a limited turnover, abridged accounts could be the ideal option. Explore everything you need to know about filing abridged accounts with HMRC with our simple guide.
Abridged accounts explained
All businesses in the UK are required by law to prepare statutory accounts at the end of the year. Previously, many small businesses chose to submit “abbreviated accounts,” rather than full accounts. Abbreviated accounts are much shorter than full accounts and meant that businesses only needed to include a simple balance sheet showing their assets and liabilities.
As of 1st January 2016, abbreviated accounts were abolished under UK company law. But that doesn’t mean that all businesses are now required to include all their financial information when they file accounts with Companies House. There’s now an option to file a type of account referred to as an “abridged account.”
So, what are abridged accounts? Abridged accounts are essentially a simplified version of your company’s annual accounts. They require much less information than full accounts, which means that they’re a great option for businesses that want to limit the amount of financial information that’s publicly accessible regarding their company.
What information should be included in abridged accounts?
Because they exclude a breakdown of items on your balance sheet, abridged accounts include less information than full accounts. So, what needs to be included? Most importantly, a simpler balance sheet, as well as any related notes. The balance sheet should include the name and signature of a director. In addition, you may wish to include a simpler profit and loss account, as well as a directors’ report.
Abridged accounts don’t need to include a breakdown of your business’s fixed assets, debtors, and creditors. And because there’s no breakdown of creditors, you won’t need to disclose your corporation tax figure (meaning that it’s impossible for competitors to estimate your net profit). You may also decide to “fillet” your abridged accounts. This means that the profit and loss report and the directors’ report will be removed from the Companies House version of your accounts.
Should my company file abridged accounts with HMRC?
There are strict rules regarding which companies can file abridged accounts with Companies House, and which can’t. Put simply, your business must meet at least two of the following criteria:
Your turnover does not exceed £10.2 million
Your balance sheet total does not exceed £5.1 million
Your average number of employees does not exceed 50
In addition, you’re only allowed to send abridged accounts if all your company members agree. When you file your accounts with Companies House, you’ll need to include a statement on the balance sheet stating that the members have agreed to abridge the accounts for this accounting period.
What about micro-entity accounts?
Beyond abridged accounts, there’s also an option for companies with even smaller turnovers, called micro-entity accounts. Essentially, very small companies (micro-entities) may only need to prepare a balance sheet and profit and loss account with even less information than is included in an abridged account. Furthermore, micro-entity accounts don’t require you to prepare a directors’ report. To file micro-entity accounts, your firm will need to meet at least two of the following criteria:
Your turnover does not exceed £632,000
Your balance sheet total does not exceed £316,000
Your average number of employees does not exceed 10
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