‘Simplification’ for micro entities

Under new rules, micro-entities (defined as those with a balance sheet total assets less than £316,000; net turnover less than £632,000 and fewer than 10 employees (average) during the financial year) will be able to take advantage of new rules from 30 September 2013.  The new rules will allow them to prepare their accounts without recognising accruals or prepayments as long as these relate to ‘charges other than the cost of raw materials and consumables, value adjustments, staff costs and tax’. Apart from this limited exemption, normal accruals accounting would still apply.  However, these rules only relate to accounts filed with Companies House and micro-entities would still be required to prepare accounts with full accruals and prepayments for submitting to HM Revenue & Customs which would mean duplicating work required to prepare accounts and tax for the year end.

In our view, these changes lead to additional complexity and cost rather than the simplification intended.  Therefore, we will be continuing to prepare accounts in accordance with the UK accounting standards required by HM Revenue & Customs which will also fulfil the requirements for Companies House.  This will continue to make the year end process as simple and efficient as possible for clients.