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.