A company must meet at least two of the three following conditions:

1. turnover not more than £632,000
   

1. balance sheet total not more than £316,000
   

1. average number of employees not more than 10.
   

A company will qualify as a micro-entity in relation to its first financial year if the qualifying conditions are met in that year. In any subsequent year the company will continue to qualify as a micro-entity if the qualifying conditions are met in that year.

There are further rules relating to circumstances where a company fails the test in later years and for parent companies in a group.

Company law has introduced a new sub-classification of small companies - known as a ‘micro-entity’. This followed an EU initiative to reduce costs for small and medium-size enterprises.

The micro-entity legislation came into force on 1 December 2013 and is effective for financial years ending on or after 30 September 2013.

Micro-entity reporting exemptions are available to the smallest companies although some companies such as charitable companies are explicitly excluded from the regime.

Yes. if a company is a PLC, a company carrying on an insurance market activity, an ineligible financial services company or a member of an ineligible group, it will fail to qualify for micro entity reporting.

In groups of companies, micro entity reporting is not available where the company is a parent company preparing group accounts or where a subsidiary that is included in consolidated group accounts.

Investment companies, financial holding companies, credit institutions, insurance undertakings and charities are also ineligible.

A directors’ report is required, subject to small company exemptions. There are two optional balance sheet formats and a profit and loss format. The standard notes to the accounts are not required.

The notes to the accounts that are required must appear at the foot of the balance sheet. These notes are -

1. Information about directors’ benefits
   

1. Information about directors’ advances, credit and guarantees
   

1. Guarantees and other financial commitments.
   

The company is still presumed to be carrying on business as a going concern, accounting policies should be consistent and comparative figures are required.

Revaluations are not allowed.

The filing requirements remain the same as for small companies.

The accounts are presumed to give a true and fair view. The accounts must be prepared in accordance with generally accepted accounting principles and practice.

No. Accountants are required to undertake the same work they have always had to do in order to comply with the Companies Act requirements, accounting and financial standards and the requirements of professional and governing bodies.

The only difference is in the presentation of the accounts which is marginally simplified for small companies.

HM Revenue & Customs still require accounts information in a full and detailed format.

The Department for Business Innovation & Skills said :

“A key feature of the Micros Directive is that it provides the smallest companies with the opportunity to prepare and publish simplified financial statements (profit and loss account; and balance sheet) if they wish.A significant number of UK companies may benefit from this exemption.”

So, in a nutshell, a company can choose to present public information in a slightly simplified manner. That’s it. What the actual benefit might be is for the company to decide.