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Thresholds for small and Medium-sized Companies and Groups

URN No: 05/1973

A company (or group) qualifies as a small or medium-sized company (or group) if it meets two out of three criteria relating to turnover, balance sheet total and number of employees as set out below in its first financial year, or in the case of a subsequent year, in that year and the preceding year.
 

Audit Exemption Threshold

The audit exemption conditions are met if a company qualifies as small; it has a turnover of not more than £5.6 million and a balance sheet total of not more than £2.8 million.

Protection for Shareholders

Although companies that meet the requirements are able to take advantage of exemption from the independent statutory audit there are safeguards in company law to protect the interests of external shareholders.  Section 249B(2) of the Companies Act 1985 allows shareholders holding at least 10% of the share capital of a company to require an audit of the accounts.

The two-month period from the coming into force of the regulations on 30 January 2004 and the coming into effect of the audit exemption thresholds will allow shareholders who would otherwise have been unable to take advantage of section 249B(2) (because notice must be given not later than one month before the end of the financial year) to do so if they wish.

Regulatory Impact Assessments

Partial Regulatory Impact Assessments (RIAs) were published with the thresholds consultation document.  Following consideration of the responses final RIAs taking account of the comments concerns, costs and benefits of the proposals were completed.

To obtain copies of the RIA on the small and medium-sized company thresholds please click below,

and for the RIA on the audit exemption thresholds please click below,