top of page
  • Writer's picturePTA

Do you Need to Send Micro-Entity Accounts or Full Accounts?

Updated: Jan 17

There is no getting around the fact that every company or association must file accounts with the Companies House and a corporate tax return so that HMRC knows how much tax it owes. Even if your business is making a loss, as a business owner, it is your responsibility to send annual accounts to the Companies House. Depending on the size of your business, you may be able to reduce the administrative burden and send micro-entity accounts to Companies House instead of full accounts. If you're not sure about any of this, you've come to the right place. We're here to guide you through the process and give you all the information you need to see if your company qualifies for micro accounts.

Understanding the Basics of Corporate Tax Returns and Annual Accounts in the UK

In the UK, businesses are required to submit various financial documents to regulatory bodies like Companies House and HM Revenue and Customs (HMRC). This article will explore whether companies in the UK need to send micro-entity accounts or full accounts as part of their corporate tax returns and annual accounts. This part of the article will cover the basics, including the definitions of micro-entity and full accounts, and the general requirements for both.

Do I Need to Send Micro-Entity Accounts or Full Accounts?

Definitions and Criteria

  • Micro-Entity Accounts: Micro-entities are very small companies. To qualify as a micro-entity, a company must meet two of the following criteria:

  • A turnover of £632,000 or less.

  • A balance sheet total of £316,000 or less.

  • 10 employees or less.

  • Full Accounts: These are more detailed accounts that larger companies are required to submit. There are no specific size criteria for submitting full accounts, and any business can choose to do so if they prefer.

Legal Requirements

As per the latest updates, both micro-entities and other companies must adhere to certain legal requirements:

  1. Statutory Accounts to HMRC: Regardless of size, all companies must send statutory accounts to HMRC as part of their Company Tax Return.

  2. Abridged Accounts: Companies, particularly small ones, can send simpler (‘abridged’) accounts to Companies House. This includes a balance sheet and any notes, with an option to include a simpler profit and loss account and a director’s report.

  3. Economic Crime and Corporate Transparency Act: In 2023, the Economic Crime and Corporate Transparency Act was enacted, bringing significant changes, including more stringent measures for company registrations and data validation.

  4. Software-Only Filing: There is a move towards software-only filing, aimed at increasing transparency and fighting economic crime. This change is particularly relevant for micro entities that previously filed their own accounts.

Preparing and Filing Accounts

  • Micro-Entity Accounts: These accounts are simplified and only include a balance sheet with footnotes, a signed director’s statement, and abridged profit & loss accounts starting from gross profit.

  • Full Accounts: These are more comprehensive and include a detailed balance sheet, profit & loss account, director’s report, and potentially an auditor’s report.

Filing Deadlines

The deadlines for submitting accounts to Companies House vary depending on the date of incorporation of the company. Generally, the first accounts must be filed 21 months after registration, and annual accounts 9 months after the company’s financial year ends.

Considerations for Choosing Account Type

Businesses must consider various factors when deciding between micro-entity and full accounts:

  1. Size and Scope: Smaller companies with limited transactions may find micro-entity accounts more manageable.

  2. Future Plans: Companies planning to expand may benefit from submitting full accounts early on.

  3. Public Perception: Full accounts provide more information to the public, which can be advantageous for gaining investor trust or securing loans.

  4. Regulatory Changes: Keeping abreast of legislative changes, like the move to software-only filing and enhanced scrutiny under new acts, is crucial​​.

In summary, the choice between micro-entity and full accounts depends on the company's size, operational complexity, and future aspirations. All companies, regardless of their size, must comply with statutory requirements, including submitting accounts to HMRC and adhering to the latest regulatory changes.

What are the Benefits of Filing Micro Business Accounts?

If you are eligible to file micro business accounts, there are three main benefits:

● It's less time-consuming than submitting full company accounts

● The process is simpler, so there's less chance of getting it wrong

● Filing micro business accounts quickly and easily can save you money as you may not need to hire an accountant

Accounting Software for Micro-Entity Accounts

While you can manually complete your accounts, you may want to hire an accountant to do this for you. You can also use accounting software that will help you fill out and format all the required information. Good accounting software can save you time and ensure you submit exactly what you need.

Should I Hire an Accountant to File Micro Business Accounts?

Filing micro-entity accounts can be complex as you need to ensure your accounts comply with the FRS 105 Financial Reporting Standard. Even if you are familiar with preparing an income statement and balance sheet, you may not understand what is required in the abridged versions. To ensure you remain compliant and to save you a great deal of time and hassle, it is best to hire an accountant to file micro-accounts.

The Differences between Micro-Entity Accounts and Full Accounts - An Insight

Understanding the differences between Micro-Entity Accounts and Full Accounts is crucial for businesses in the UK. These two types of financial reporting cater to companies of different sizes and complexities. This section delves into their distinct features, highlighting how they cater to the varying needs of small versus larger enterprises.

Definition and Eligibility

  • Micro-Entity Accounts: These are simplified financial statements designed for very small companies. A company qualifies as a micro-entity if it meets two of the following criteria: turnover of £632,000 or less, a balance sheet total of £316,000 or less, and 10 or fewer employees.

  • Full Accounts: These accounts are comprehensive financial statements prepared by larger companies. There are no specific size criteria for submitting full accounts. Any business, regardless of size, can opt to submit full accounts.

Content and Detail

  • Micro-Entity Accounts:

  • Simplicity: They include a simplified balance sheet and potentially abridged profit and loss accounts.

  • Exemptions: Micro-entities can benefit from certain exemptions such as not needing to file a director’s report or profit and loss account​​.

  • Public Disclosure: Less financial information about the company is available publicly, which can impact transparency.

  • Full Accounts:

  • Comprehensive: Include a detailed balance sheet, profit & loss account, director’s report, and possibly an auditor’s report.

  • Transparency: Provide a complete picture of the company’s financial status, which can be beneficial for stakeholders, including investors and creditors.

Filing Requirements

  • Micro-Entity Accounts:

  • Simpler Filing: Micro-entities have the option of filing ‘filleted’ accounts, which may exclude the profit and loss account.

  • Software Filing: With the move towards digital filing, micro-entities must adapt to software-only filing requirements.

  • Full Accounts:

  • Detailed Filing: Requires filing of all components, including detailed notes and disclosures.

  • Digital Compliance: Larger companies are also moving towards digital filing, using formats like iXBRL for tagging financial data.

Impact on Stakeholders

  • Micro-Entity Accounts:

  • Privacy vs. Transparency: Offers more privacy for business owners, but may limit the information available to potential investors and creditors.

  • Ease of Management: Simpler for small business owners who may not have extensive accounting resources.

  • Full Accounts:

  • Greater Scrutiny: Allows stakeholders to thoroughly assess the company’s financial health.

  • Investor Confidence: Comprehensive accounts can increase investor confidence and facilitate credit approval processes.

Legal and Regulatory Considerations

  • Micro-Entity Accounts:

  • Must adhere to specific legal frameworks and accounting standards tailored for small entities.

  • Recent regulatory changes, such as the ECCTA, may impose additional reporting requirements.

  • Full Accounts:

  • Must comply with more extensive accounting standards and regulations, including international financial reporting standards (IFRS) where applicable.

  • Also affected by changes in corporate law and financial reporting standards.

The choice between Micro-Entity Accounts and Full Accounts depends on a company's size, operational complexity, stakeholder needs, and long-term goals. Micro-Entity Accounts offer simplicity and less public disclosure, ideal for very small businesses. In contrast, Full Accounts provide comprehensive financial details, catering to larger companies with more complex operations and a broader range of stakeholders. As regulations evolve, particularly with the introduction of digital filing and the ECCTA, companies must stay informed and choose the accounting framework that best suits their needs and complies with the legal requirements.

Detailed Filing Requirements and Practical Considerations for UK Companies

Filing Requirements for Micro-Entities and Small Companies

  • Micro-Entities: Companies qualifying as micro-entities can prepare simpler accounts that meet statutory minimum requirements. They can send only their balance sheet with less information to Companies House. However, as per recent changes, micro-entities are now required to file their profit and loss account, although there is a provision that this account, or parts thereof, may not be made publicly available​​.

  • Small Companies: Small companies can choose to send abridged accounts to Companies House. Abridged accounts must contain a simpler balance sheet, with optional inclusion of a simpler profit and loss account and a copy of the director’s report.

Exemptions and Filleted Accounts

  • Profit and Loss Account Exemption: Micro-entities have the option of filing what are referred to as ‘filleted’ accounts, which means they can elect not to file the profit and loss account with Companies House. However, the balance sheet must contain a statement that the accounts have been delivered in accordance with the small companies regime.

Practical Steps for Preparing and Submitting Accounts

  • Preparation: Companies do not have to use a professional accountant to prepare accounts. However, directors must be aware of their legal responsibilities. It's advisable to seek professional advice if uncertain about the requirements.

  • Approval and Signing: The company’s board of directors must approve the accounts before sending them to the company’s members. Key documents like the balance sheet and directors’ report must be signed by a director or the company secretary.

  • Submission to Companies House: Companies House requires a copy of the accounts prepared for the members or shareholders. However, small companies and micro-entities can prepare an abridged version with less detail by omitting certain balance sheet items.

Filing Deadlines

  • Standard Deadlines: For private companies, accounts must be filed 9 months from the accounting reference date; public companies have a 6-month deadline.

Considerations for Micro-Entities and Small Companies

  • Transparency vs. Privacy: The debate around the level of financial transparency required for small businesses and micro-entities is ongoing. Some argue that a minimum level of transparency is necessary for the privilege of limited liability, while others express concerns over privacy and the potential negative impact of making full income information publicly available.

  • Changing Regulations: Companies must stay informed about the changing filing requirements, especially with the introduction of new legislation like the Economic Crime and Corporate Transparency Act​​.

  • Digital Filing and Software Use: The move towards software-only filing is designed to increase transparency and streamline the filing process. This shift is significant for micro-entities previously filing their accounts manually.

  • Impact on Business Operations: The requirement to file more detailed financial statements may affect business operations, particularly for small companies concerned about revealing financial details to the public or competitors.

The recent legislative changes and the move towards digital filing have significant implications for UK companies, particularly micro-entities and small businesses. While these changes aim to improve transparency and reduce economic crime, they also pose challenges in terms of privacy and the complexity of compliance. In the next part, we will explore the broader implications of these changes and provide insights into managing these new requirements effectively.

Broader Implications and Managing New Requirements

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduces significant reforms that impact UK companies of all sizes. These changes, aiming to improve corporate transparency and tackle economic crime, involve identity verification requirements, enhanced powers for the Registrar of Companies, and alterations in filing processes​​​​.

Key Changes and Their Implications

  1. Identity Verification: All directors, Persons with Significant Control (PSCs), and those filing documents at Companies House must have their identity verified. This applies to both new and existing directors of UK companies. Breaching this requirement can result in fines, although the validity of acts by an individual as a director will not be affected.

  2. Enhanced Powers of the Registrar: The Registrar will have increased authority to scrutinize, reject, and, in some cases, remove information that seems incorrect or inconsistent. This enhances the Registrar's role as a gatekeeper in company creation and a custodian of more reliable data​​.

  3. Digital Filing and iXBRL Tagging: All accounts will need to be digitally submitted to Companies House and tagged using iXBRL, the standard labels for reporting financial data. This aims to improve the reliability and accuracy of information on the register.

  4. Appropriate Registered Office and Email Address: The registered office for a company must be an appropriate address, and companies are also required to keep a registered email address with Companies House. This ensures that companies are readily contactable and accountable​​.

  5. Company Name Restrictions: The use of certain company names that could facilitate crime will be prohibited, empowering the Registrar to reject names that may give a misleading impression or contain computer code.

Preparing for Implementation

  • Transition Period: Implementation of these changes is expected to take place in stages over the next 12 to 24 months, with some reforms taking effect in early 2024. This phased approach allows Companies House to develop its internal systems and companies time to prepare.

  • Compliance Strategy: Companies must develop a strategy to ensure compliance with the new requirements. This includes establishing processes for identity verification and ensuring that all necessary filings are made in accordance with the new rules.

  • Seeking Professional Advice: Given the complexity of the new regulations, companies may benefit from consulting legal and accounting professionals, particularly those who are Authorized Corporate Service Providers (ACSPs), to navigate the new landscape.

The ECCTA marks a significant shift in the UK's approach to corporate transparency and economic crime prevention. Its impact extends to every UK company, necessitating a thorough understanding and proactive management of the new requirements. Companies must remain vigilant and adaptable to comply with these changes, thus contributing to a more transparent and accountable business environment in the UK.

In summary, the ECCTA introduces comprehensive reforms affecting company filings, identity verification, and the overall regulatory landscape for UK companies. These changes underscore the government's commitment to combating economic crime and enhancing corporate transparency. Businesses must stay informed and prepared to adapt to these evolving requirements.

How a Tax Accountant Can Help You With Micro-Entity Accounts and Full Accounts

How a Tax Accountant Can Help You With Your Company's Tax Returns/Annual Accounts Submission

In the UK, the process of preparing and submitting tax returns and annual accounts can be intricate, especially with the varying requirements for Micro-Entity Accounts and Full Accounts. A tax accountant plays a pivotal role in guiding companies through these complexities. This section explores how tax accountants can assist businesses in efficiently managing their tax and accounting obligations.

Understanding Compliance Requirements

  • Regulatory Knowledge: Tax accountants are well-versed in the latest UK tax laws and accounting standards. They can help businesses understand whether they should file Micro-Entity Accounts or Full Accounts based on their size and turnover​​.

  • Advising on Changes: With the introduction of the Economic Crime and Corporate Transparency Act, accountants can advise on the new compliance requirements and digital filing processes​​.

Tailoring Financial Reporting

  • Suitability Assessment: A tax accountant can determine the most suitable type of financial reporting for a company, be it Micro-Entity Accounts for smaller businesses or Full Accounts for larger enterprises.

  • Customized Reporting: They can tailor the financial statements to ensure they meet the statutory requirements while also serving the company’s specific needs for analysis and decision-making.

Tax Optimization and Planning

  • Tax Efficiency: Accountants help in identifying opportunities for tax savings, ensuring that businesses don't pay more tax than necessary.

  • Future Tax Planning: They can assist in forward-looking tax planning, helping businesses make informed decisions that could impact their future tax liabilities.

Ensuring Accuracy and Compliance

  • Error Reduction: Tax accountants meticulously prepare and review financial statements and tax returns, reducing the risk of errors that could lead to penalties or additional scrutiny from HMRC.

  • Compliance Assurance: They ensure that all filings are in compliance with current UK tax laws and accounting practices, thereby safeguarding businesses against legal complications.

Handling Complex Transactions

  • Expertise in Complexities: Businesses with complex transactions or unusual financial events can benefit from a tax accountant's expertise in handling such matters, ensuring these are accurately reflected in the accounts.

  • Advisory on Transactions: Accountants provide advice on the tax implications of major business transactions like mergers, acquisitions, or capital investments.

Digital Filing and Software Utilization

  • Navigating Digital Systems: With the shift towards digital filing, tax accountants can guide businesses in using software systems effectively for financial reporting and tax submissions​​.

  • iXBRL Tagging: They can help in tagging financial data using iXBRL, ensuring compliance with the digital filing requirements set by Companies House.

Communication with HMRC and Companies House

  • Liaison Role: Tax accountants often act as intermediaries between the company and regulatory bodies like HMRC and Companies House, facilitating smooth communication and submission processes.

  • Handling Queries and Inspections: They can efficiently handle queries from HMRC or Companies House, including during audits or inspections.

Advisory on Business Decisions

  • Strategic Insight: Tax accountants provide valuable insights that can influence strategic business decisions, offering a perspective that aligns financial management with business goals.

  • Risk Management: They help in identifying and managing tax-related risks, providing solutions to mitigate potential financial liabilities.

Supporting Growth and Expansion

  • Scaling Guidance: As businesses grow or expand, tax accountants can provide guidance on the transition from Micro-Entity Accounts to Full Accounts, ensuring that the financial reporting evolves with the business​​.

  • International Taxation Advice: For businesses looking to operate internationally, tax accountants can offer advice on international taxation and compliance with global accounting standards.

A tax accountant is an invaluable asset for UK businesses navigating the complexities of tax returns and annual accounts submission. They provide expertise in compliance, optimization, and strategic planning, ensuring that businesses not only adhere to regulations but also capitalize on financial opportunities. With their guidance, companies can confidently manage their financial reporting, maintain compliance, and focus on growth and success in the ever-evolving business landscape.



bottom of page