Small Company
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What is the Definition of a Small Company?
Under the Companies Act 2006, a company qualifies as “small” if it meets at least two of the following criteria:
- Annual Turnover: Does not exceed £10.2 million.
- Balance Sheet Total: Does not exceed £5.1 million (total of fixed and current assets).
- Number of Employees: Employs no more than 50 staff members.
These thresholds were updated by the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015 and align with EU directives to simplify financial reporting for smaller entities.
Benefits for Small Companies
Small companies benefit from less stringent financial reporting and auditing requirements, which reduce administrative burdens. These include:
- Exemptions from Statutory Audit: Many small companies do not require a full audit of their accounts.
- Abbreviated Accounts: They can file simpler financial statements with Companies House.
- Cost Savings: Reduced reporting requirements save time, money, and resources—valuable for smaller businesses with limited capacity.
Latest Updates and Legislation
- The Economic Crime and Corporate Transparency Act 2023 introduced new measures for small companies to report beneficial ownership while maintaining simpler reporting obligations.
- A review of the Small Business, Enterprise and Employment Act 2015 reaffirmed the importance of simplified reporting standards to encourage small business growth.
Useful Links
- Companies House Guidance for Small Companies Offers detailed instructions on filing requirements and exemptions for small businesses.
- Companies Act 2006 (Legislation.gov.uk) Provides the legal framework defining small companies and their accounting obligations.
- Economic Crime and Corporate Transparency Act 2023 Explains recent updates to reporting requirements for small companies, ensuring compliance with transparency regulations.
For more detailed insights into company types, explore our Business data product which provides extensive Company Data on all UK registered companies.
Related Articles:
- Glossary: Dormant CompanyDefinition of a dormant company for accounting purposes. How to determine if a company can be classified as a dormant for accounting purposes.
- Glossary: Micro-EntitiesMicro-entities can submit filed accounts to Companies House with with a reduced set of information than that required by a small, medium or large company.
- Glossary: Exemptions for Small CompaniesSmall companies and the associated subset micro-entities are able to claim certain exemptions when they file their accounts.
- Glossary: Filed Accounts Medium-Sized CompanyAs with a small company, a medium-sized company is determined by its turnover, balance sheet total (meaning the total of the assets) and the average number of employees.
- Glossary: Exemptions for Subsidiary CompaniesA subsidiary may claim exemption from audit if its parent is established under the law of an EEA state, in certain circumstances.