Micro-entity in the UK? – Find your way through the meandering streets of tax compliance

If you run a micro-entity, you must know the legislation regarding your tax filing procedures. A micro-entity must comply every year to Companies House else there could be serious consequences. The registrar might assume the company is dormant and strike it from the register. In such cases, the company ceases to exist and its assets become Crown property.

The company’s officers could be prosecuted as they are personally responsible for the timely submission of information on time. There could be a civil penalty for late submission too.

Hence, we have put together a comprehensive guide of filing legislation and rule so you can ensure you are not on the wrong side of the law.

It is recommended to read this guide together with the Companies Act 2006 and the relevant regulations which are available to view on the UK legislation website. A couple of relevant legislations are listed at the end of the article to help you navigate the law.

In the meanwhile, here is a summary to guide you on the compliance of your micro-entity.

Establishing qualification as a micro-entity

In order to qualify as a micro-entity company, you need to ensure that your organization fulfils at least two of the following:

– turnover must be not more than £632,000

– the balance sheet total must be not more than £316,000

– the average number of employees must be not more than 10

You cannot file a micro-entity account if your organization has been any of the following in the past financial year:

– a limited partnership

– a qualifying partnership as defined under the Partnership (Accounts) Regulations 2008

– a public limited company

– an overseas company

– an unregistered company

– a company authorised to register under section 1040 Companies Act 2006

– a charitable company

– a company that is excluded from the small company’s regime under section 384 Companies Act 2006, or is excluded from being treated as a micro-entity under section 384B Companies Act 2006.

Accounting Records

Every company, trading or not, must keep accounting records and these must contain:

– entries showing all money received and expended by the company

– detailed records of the assets and liabilities of the company

If the company’s business involves dealing in goods, the records must contain:

– Statements showing stock holding of the company at the end of each financial year

– Stock taking statements from which any other statements or reports are compiled

– Statements of all goods sold and purchased, excluding retail trade, detailing goods, buyers and sellers.

Parent companies must make sure that their subsidiary companies maintain sufficient accounting records so as to enable the directors of the parent company to prepare accounts that comply with the Companies Act or International Accounting Standards.

There are other salient features and key points to take note with regards to filing accounts as a micro-entity. For a more detailed read, you can refer to the official website of the HMRC. If you are seeking advice, suggestions, and guidance in navigating through compliance and filing procedures, including iXBRL tagging services, get in touch with us. Our expertise in this area ensures a smooth and compliant filing process for your business. connect us at enquiry@datatracks.co.uk. We would be delighted to help!

The relevant legislation for a quick read.

Some of the main regulations that you can read on to get a deeper understanding of the law are:

The Companies Act 2006

The Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008

The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008

The Partnerships (Accounts) Regulations 2008

The Companies and Limited Liability Partnerships (Accounts and Audit Exemptions and Change of Accounting Framework) Regulations 2012

The Small Companies (Micro-Entities Accounts) Regulations 2013

For further insights:

Micro Entities – HMRC tax definitions and CATO

Micro- entity in the UK? Percipience into the FRS that you may want to follow

FRS 105: Micro-entities in the UK

Note: The information contained in this blog is provided for informational purposes only, and should not be construed as legal advice on any subject matter.