In the UK, company size thresholds dictate various statutory requirements, such as financial reporting and audit obligations. These thresholds have remained unchanged since January 2016.
It was proposed in March that these thresholds be reviewed as part of the government’s aim to modernise the UK corporate reporting system and ease the administrative burden on Small and Medium Enterprises.
It is expected that this will be finalised this summer and will impact accounting periods starting on or after 1 October 2024.
What are the new size limits?
Below is a table of the current thresholds against the proposed new thresholds.
Ordinarily, a company must exceed 2 out of 3 thresholds for 2 successive years in order to be classified at that size, however, transitional provisions may apply. It is anticipated that employee numbers will also be reviewed in the future.
What does this mean for me?
The proposed changes will affect both the preparers and the users of the financial statements.
Simpler reporting requirements may result in the annual financial statements being quicker to prepare as there may be few disclosure requirements, especially if your business falls into a smaller size category.
It is also expected that users of the financial statements will find them easier to understand due to the reduced amount of information included. However, this may seem contradictory and could lead to other stakeholders needing extra details for broader purposes, such as securing financing.
If your Company is on the cusp of a threshold, we will be able to advise on the best treatment for your individual business.
Impact on UK Audit Thresholds
If the changes come in as anticipated the first companies affected will be those with a year end of 30 September 2025.
If your Company’s turnover is between £10.2m and £15m; and gross assets between £5.1m and £7.5m, you are likely to be affected by the changes and we would highly recommend getting in touch with us as you may no longer need an audit. We can then discuss how the changes apply to you and help you consider if the benefits of having an audit, other than simply meeting your statutory duties outweigh the costs.
Next Steps
We will update you when the above is finalised and look forward to speaking to all of those impacted. If you would like any further clarification, please get in touch.