Everything You Need To Know About Abridged Accounts
EVERYTHING YOU NEED TO KNOW ABOUT ABRIDGED ACCOUNTS WHAT ARE ABRIDGED ACCOUNTS?
Author: Uk Tax Associate Molly Smith
WHAT ARE ABRIDGED ACCOUNTS?
Abridged accounts were introduced in 2008 and are a simplified record of a small company’s accounts. Some financial specifics that are included in full accounts can be excluded from the financial statements, balance sheet, and profit and loss statement, when finalizing abridged accounts. Abridged accounts help small businesses make it more difficult for the public to gain a perception of the company's performance from Companies House.
Abridged accounts are slightly more detailed than the abolished abbreviated accounts.
WHAT ABRIDGED ACCOUNTANTS INCLUDE
Abridged accounts do not include a breakdown of items on the balance sheet; it is not essential to include a breakdown of debtors, creditors, and fixed assets. Due to this, the account’s corporation tax figure is not displayed.
Abridged accounts must include the simplified balance sheet and profit and loss statement, along with any notes the company wishes to disclose.
Without this breakdown, it is not possible to approximate a company’s net profit or loss.
If you have abridged accounts, they will have to be identified, therefore a statement needs to be included mentioning that the accounts enclosed are abridged. It has to mention that shareholders have consented to the abridged accounts.
The balance sheet must include the name of the director of the company, alongside their signature. The company can decide to append a simple profit and loss account, in addition to a copy of the company director’s report.
Even though abridged accounts are much simpler than filing full accounts, companies still are obliged to present a fair and true depiction of their accounts.
Unless a company decides to claim exemption, the abridged accounts must include an auditor’s report.
- The average number of employees is less than 50, therefore must be a small-sized business
- Company turnover is less than £10.2 million
- The number of employees required to be considered as a ‘small company’ stayed the same with a threshold of 50.
- The turnover to qualify as a ‘small company’ was previously £6.5 million[5], compared to the current £10.2 million with abridged accounts
- The balance sheet limit to be identified as a ‘small company’ was capped at £3.6 million, whereas now with abridged accounts, the balance sheet threshold stands at £5.1 million.
WHEN CAN ABRIDGED ACCOUNTS BE FILED
You will need to file abridged accounts if you do not publish the net profit of your company
You will be able to file an abridged account when all shareholders of your company have agreed to the abridgment of accounts. This consent from shareholders must be given every year, meaning it can not be left to a majority vote, all shareholders have to approve the use of abridged accounts. To file abridged accounts you must meet two of the three requirements:
Balance sheet totals to less than £5.1 million.[1]
Therefore, if you are a small business and believe that your company profits should be a private matter, you must file abridged accounts.
ABBREVIATED ACCOUNTS
Abbreviated accounts, due to changes in UK Company Law, were abolished and could no longer be filed after January 1, 2016[4].
These types of accounts were commonly used amongst small businesses as they required far less information than full accounts, as the public and competitors could not gain a detailed insight into the business performance of your small company – similar to the abridged accounts.
Therefore, from January 1 2016 small companies would have to file full accounts, or the alternative option – file abridged accounts. These differ from the previous abbreviated accounts as the criteria for what Companies House considered a small business changed.
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