New regulations on audit requirements for small and medium-size firms.

New regulations have reduced the burden of financial reporting and audit obligations for smaller companies. 

Other changes which have been made will affect companies of all sizes.  The Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 came into force on 6 April 2015 and apply to financial years beginning on or after 1 January 2016.

Company directors can elect to take advantage of the new regime for a financial year beginning on or after 1 January 2015 but before 1 January 2016.

The new regulations increase the thresholds which determine when a company or group qualifies as small for the purposes of certain accounting and reporting exemptions, and for exemption from audit.

In order to qualify as small, a company or group must meet at least two out of three qualifying conditions, which are amended as follows:

• Annual turnover must be not more than £10.2m (previously £6.5m)
• Balance sheet total must be not more than £5.1m (previously £3.26m)
• Average number of employees must be not more than 50 (no change)

For parent companies, aggregate annual turnover of the group must be not more than £10.2m net or £12.2m gross (previously £6.5m net or £7.8m gross)

Public companies are not able to take advantage of the small companies’ regime.

Parent companies are not obliged to prepare group accounts if they are subject to the small companies’ regime.

The qualifying conditions for medium-sized companies (of which two out of three must be met) have also been amended:

Companies (other than parent companies):

• Annual turnover must be not more than £36m (previously £25.9m)
• Balance sheet total must be not more than £18m (previously £12.9m)
• Average number of employees must be not more than 250 (no change)

Parent companies:

• Aggregate annual turnover of the group must be not more than £36m net or £43.2m gross (previously £25.9m net or £31.1m gross)
• Aggregate balance sheet total must be not more than £18m net or £21.6m gross (previously £12.9m net or £15.5m gross)
• Aggregate number of employees must be not more than 250 (no change)

As with the small companies’ regime, private companies will no longer automatically be excluded if they are a member of a group which includes a public company, but will still be excluded if the group includes a traded company.

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