Recent changes to UK company law mean small companies no longer have the option to submit so-called abbreviated accounts for periods beginning on or after 1 January 2016. Small companies are still able to take advantage of some filing options under the new regime, but the change has led to some misunderstandings, and in some cases to rejection of company accounts filed with the Registrar of Companies.

After liaising with Companies House and member firms, ICAEW has produced a set of frequently asked questions (FAQs), together with background information to help small companies and other interested parties navigate the new rules.

The problems with rejected accounts appear to be down to changes to company law and revisions to accounting standards as a consequence of new regulations under the Companies, Partnership and Groups (Accounts and Reports) Regulations 2015.

This increased the threshold for companies that qualified as small companies, meaning that some companies may have felt it was beneficial to early adopt and take advantage of the exemption available under section 444, Companies Act 2006. Small entities are defined as having two of the following to qualify as a small company - turnover of £10.2m, gross assets of £5.1m and maximum 50 employees.

The major changes arising from the new regulations relate to the UK small companies regime. These include new criteria for qualifying as a small company, changes to the information required in small company accounts, amended accounts formats, and different filing obligations. 

This is particularly important for small companies that do not take advantage of the exemptions available at micro entities. The withdrawal of the Financial Reporting Standard for Smaller Entities (FRSSE) means that many small entities will be applying FRS 102 for the first time in accounting periods beginning on or after 1 January 2016.

A specific item, Section 1A Small entities has been added to the September 2015 version of FRS 102, setting out simplified presentation and disclosure requirements for entities that choose to apply the small entities regime.

There is confusion as there have been so many changes to UK GAAP since the decision to move to the new FRS standards. As a result, small and medium-sized companies can continue to file an abbreviated version of their accounts with Companies House for accounting periods ending before December 2016, provided they have not opted to adopt the new regulations early.

However, it is important to note that the new regulations remove this option for acounting periods beginning on or after 1 January 2016.

The new regime introduces so-called 'file what you prepare' model. The basic principle is that the accounts filed at Companies House are the same as those prepared for the members. Small companies can choose to not file the profit and loss account and/or the directors' report. This watered down version is known as 'filleted accounts'. Under this set-up, if a small company chooses not to file the P&L account or the directors' report, the balance sheet submitted to Companies House must reflect this.

The new regulations introduce an important new option for small companies to prepare and file an abridged balance sheet, abridged profit and loss account, or both. However, very few companies have taken advantage of this option so far as they can still file abbreviated accounts under the old regime. 

Under the new regulations, a small company that is required or chooses to have an audit is required to file its audit report only when it has chosen to file a copy of the P&L account. A small company that does not file its P&L account is not required to file its audit report. The notes to the balance sheet filed at Companies House must disclose whether the auditor’s report was qualified or unqualified; the basis of the qualification, and the name of the auditor and the name of the person who signed the auditor’s report.

Dr Nigel Sleigh-Johnson, head of ICAEW’s financial reporting faculty, said: ‘The new regime reflects UK implementation of a new EU accounting directive and means that small companies can no longer file an abbreviated version of their full accounts at Companies House – they have to file the version they prepare for members.

‘But they can, for example, prepare abridged accounts for members and file those, provided shareholders all agree. There are other options too, such as choosing to remove the profit and loss account from the accounts filed on the public record.

‘There are a number of different scenarios identified in the guidance, which explains the requirements in each case.’

Also included in the guidance is a table highlighting different scenarios to give companies an indication of what type of accounts need to be prepared, and the additional statements and notes which need to be submitted to Companies House at the same time as the accounts. This covers abridged accounts.

Common scenarios under the revised small companies regime

The ICAEW Financial Reporting Faculty filing options under new small companies regime, is available here