Exemptions

For financial years that begin on or after January 1, 2016

Broadly speaking a company may qualify for an audit exemption if for two consecutive years it has at least two of the following and is not part of a group of companies:

  1. an annual turnover of no more than £10.2million
  2. assets worth no more than £5.1million
  3. 50 or fewer employees on average

However, there is an exemption to the exemption!

Even if your company is usually exempt from an audit, you must get your accounts audited if shareholders who own at least 10% of shares (by number or value) ask you to. This can be an individual shareholder or a group of shareholders.

The shareholders must make the request in writing and send it to the company’s registered office address and the request must arrive at least one month before the end of the financial year that the audit is being asked for.

Companies that must have an audit irrespective of size

Your company must have an audit if at any time in the financial year it has been one of the following:

  1. a public company (unless it’s dormant)
  2. a subsidiary company (unless it qualifies for an exemption)
  3. an authorised insurance company
  4. carrying out insurance market activity
  5. involved in banking
  6. an issuer of electronic money (e-money)
  7. a Markets in Financial Instruments Directive (MiFID) investment firm
  8. an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
  9. a corporate body and its shares have been traded on a regulated market
  10. a funder of a master trust pensions scheme
  11. a special register body
  12. a pensions or labour relations body

Contact us if you’re not sure if you must have an audit.

Groups of companies

A group has to meet the “single company” limits as a whole (with inter-group transactions and balances netted off) to be able to exempt from an audit.

The single company limits can also be considered on an aggregate basis for groups, removing the requirement to net-off inter group transactions. The adjusted gross limits are as follows:

  1. an annual turnover of no more than £12.2million
  2. assets worth no more than £6.1million
  3. 50 or fewer employees on average

A “Group” can include non-UK Companies. If the worldwide group does not qualify as a small group, then an audit will be required in the UK for each UK group member.

A UK subsidiary will also not be eligible for audit exemption if it is a member of an ineligible group.

An ineligible group is a group if any of its members is:

  • a traded company
  • a body corporate other than a company under CA 2006 (e.g. a company incorporated overseas) whose shares are admitted to trading on a regulated market in an EAA State
  • a person (other than a small company) who has permission under Part 4A Financial Services and Markets Act 2000, to carry on a regulated activity
  • an e-money issuer
  • a person who carries on insurance market activity
  • a scheme funder of a Master Trust scheme within the meanings given by s391(1) of the Pension Schemes Act 2017
  • a small company (a company that qualified as small by application of the size limits in relation to its last financial year ending on or before the end of the year to which the accounts relate) that is:
    • an authorised insurance company
    • a banking company
    • a MiFiD investment firm
    • a UCITDS management company

A PLC in the “Group” will only make the entire group ineligible for the exemption if the PLC is listed on the stock market.

Exemption for Subsidiaries

There is an exemption for subsidiaries (s 479A to 479C) if they meet certain criteria and if the parent company provides a guarantee in respect of all actual outstanding liabilities and all contingent liabilities at the end of the financial year.

Although some small companies are exempt from an audit under the criteria, they may still undertake an audit for various other reasons e.g.

  • the company’s lender requires an audit
  • a grant provider requires an audit
  • directors or shareholders may request an audit assurance
  • the company constitution may require it
  • to support future sale or public offering of the business.

Charity thresholds

The audit threshold for all charities is different from non-charitable entities. There are different scrutiny requirements for England & Wales, Scotland and Northern Ireland. For further guidance please refer to the Charities Act for the country of origin or call us on 01473 659777.