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  • Writer's pictureSam Price

Small vs. Micro accounts: What You Need to Know

Are you classified as Micro – and does it really matter?

 

For a business to fall under the Micro category, it must meet two of three conditions for two consecutive accounting periods:

 

1. Total assets less than £316k

2. Turnover less than £632k

3. 10 employees or fewer

 

Understanding the key distinctions between small and micro regimes is crucial, as the choice significantly impacts the presentation of your accounts, available choices for accounting, and disclosure requirements.

 

Small

Micro

Full accounting policies with choices

No accounting policy choices

Fair value accounting

No fair values, no deferred tax

13 disclosures – and due to increase

5 disclosures

Full profit and loss and balance sheet

Minimal profit and loss and balance sheet

Must give a true and fair view

Deemed to give a true and fair view

 

Perhaps surprisingly, many businesses under the thresholds opt for the small regime instead of the micro regime. While the latter is simpler, it often lacks the detailed information that stakeholders such as directors, shareholders, and lenders seek. Small regime users, on the other hand, willingly disclose more than required, often for strategic reasons.

 

What's changing?

 

The incentive to consider the micro regime becomes more compelling with the recent development in October 2023. It was confirmed that both small and micro-companies would be required to file a profit and loss account to Companies House in their accounts.

 

This raised concerns among small business owners about the potential exposure of previously confidential and commercial information to the public. This would put the information not only at the disposal of Companies House and law-enforcement agencies, but also competitors, customers, nosey neighbours, and anyone else!

 

However, as the process progresses, the secondary legislation which would detail the operation of the act is rumoured to include provisions that mean that those filed profit and loss accounts are not publicly visible for micro businesses.

 

Should these exceptions be granted, business owners would likely reconsider the micro regime, aiming to maintain the privacy of their sensitive financial information.

 

Taking the Next Steps

 

At Price Accounting, we prioritise advising our clients on the most suitable regime and help them carefully plan to present a comprehensive yet protected view of their business on public record.

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