What is a small group?
The whole worldwide group will qualify as small unless it exceeds two of the three following size criteria for two years in a row:
|Average number of employees
||Not more than 50
||Not more than 50
In the first year that two of the three size criteria are exceeded, the group will remain “small” that year, but would no longer be small the next year if the size criteria are exceeded again. If there is no previous year (e.g. the parent of the group is newly incorporated), then the group will be small if it meets the size criteria in the current year.
Also, some groups are not eligible to qualify as small by their nature. This includes groups where any entity is:
- a MiFID investment firm;
- a UCITS management company;
- authorised under the Banking Consolidation Directive or the Insurance Directives;
- an e-money issuer; or
- listed in an EEA state such as listed on the London Stock Exchange.
If you have one of the above in the group, you will probably know about it, but as the definitions are complex do feel free to contact us via the form below for assistance.
Are there any other exemptions?
If your UK company or LLP is a subsidiary of an EU parent company that prepares consolidated audited accounts that include the entity, then there is an exemption available if the parent guarantees the liabilities of the subsidiary. (s479A exemption).
Dormant companies and LLPs (i.e. those which have no transactions at all) are also exempt from audit. (s480 exemption).
What do I need to do if my subsidiary is not audit exempt?
The company’s directors must appoint a UK statutory auditor. The auditor will perform their work, which includes analysing the accounts and disclosures, looking at evidence that supports the transactions and balances and reviewing changes from one year to the next.
The auditor will report on whether or not the accounts are “true and fair”. The report will be included with the accounts when they are sent to the shareholders, Companies House (for filing on public record) and HMRC (with the tax return).
Get in touch
Please get in touch if you want to discuss the UK audit requirements or availability of audit exemption for your UK company or LLP.