The Institute of Chartered Accountants in England and Wales (ICAEW) have reported that new accounting rules for small companies has led to Companies House rejecting accounts filed by the 30 September deadline as companies and accountants are falling foul of complicated reporting rules under the Companies Act and new FRS 102 exemptions.
Recent changes to UK company law mean small companies no longer have the option to submit so-called abbreviated accounts for periods beginning on or after 1 January 2016 which has lead to a number of accounts being rejected.
The problems with rejected accounts appear to be down to changes to company law and revisions to accounting standards as a consequence of new regulations under the Companies, Partnership and Groups (Accounts and Reports) Regulations 2015.
This increased the threshold for companies that qualified as small companies, meaning that some companies may have felt it was beneficial to early adopt and take advantage of the exemptions available. Small entities are defined as having two of the following – turnover of £10.2m, gross assets of £5.1m and a maximum 50 employees.
The new regime introduces so-called ‘file what you prepare’ model. The basic principle is that the accounts filed at Companies House are the same as those prepared for the members. Small companies can choose to not file the profit and loss account and/or the directors’ report. This watered down version is known as ‘filleted accounts’. Under this set-up, if a small company chooses not to file the P&L account or the directors’ report, the balance sheet submitted to Companies House must reflect this.
The new regulations introduce an important new option for small companies to prepare and file an abridged balance sheet, abridged profit and loss account, or both. However, very few companies have taken advantage of this option so far as they can still file abbreviated accounts under the old regime.
Dr Nigel Sleigh-Johnson, head of ICAEW’s financial reporting faculty, said: ‘The new regime reflects UK implementation of a new EU accounting directive and means that small companies can no longer file an abbreviated version of their full accounts at Companies House – they have to file the version they prepare for members.
‘But they can, for example, prepare abridged accounts for members and file those, provided shareholders all agree. There are other options too, such as choosing to remove the profit and loss account from the accounts filed on the public record.’
The latest changes in Accounting Standards has caused confusion amongst business owners and some in the Profession. The options available to individual companies depend largely on the size of company (as defined) and whether or not the company is subject to an Audit. At Burgis & Bullock we have been dealing with these new requirements for the past 18 months and have experience filing under each of the new options. If you would like any assistance with the new regulations please get in touch on 0845 177 5500, get in touch with your usual contact, or use our on-line contact form.