What type of accounts do small companies file with Companies House?

This guide explains the format for filing annual accounts with Companies House each year – specifically the FRS105 and FRS102 frameworks, which apply to small companies.

Thanks to Christian Hickmott, MD of Integro Accounting, for providing this useful advice.

What if you’re self-employed (a sole trader)?

Before we look into the reporting requirements for companies, let’s also mention freelancers who work as sole traders.

If you are freelancing as a sole trader or as a member of a partnership, you do not need to prepare and submit any accounts.

As the individual and the business are treated as one legal entity, the only requirement is to submit your total income, expenses and profit to HMRC on your self-assessment tax return.

Some accountants will offer you an accounts preparation service, but for most one-man-band businesses, this is an additional cost that doesn’t tend to add too much value.

What if you trade through a limited company?

If you work via a limited company, the directors must prepare accounts for submission to Companies House, using an appropriate reporting framework.

For small and micro businesses, two frameworks are used the most:

• FRS 105 – the reporting framework for micro entities
• FRS 102 Section 1A – the reporting framework available to small businesses

FRS 105

This reporting framework is only available to micro companies in the UK. These are companies that must meet two out of the following three criteria:

• Turnover below £632,000 p/a
• Net assets below £316,000 p/a
• Employee count below 10 persons

This is the shortest report that can be submitted, and contains:

• Profit and loss account – which is not filed to Companies House
• Balance sheet

This is particularly useful if you want to prepare your accounts yourself, as this significantly simplifies the reporting requirements.

Many accountants prefer this framework, as it requires as little information to be submitted to the public record as possible.

FRS 102 Section 1A

FRS 102 is one of the main frameworks used for small and medium sized businesses in the UK.

Under Section 1A, however, small businesses can claim exemptions to reduce the number of disclosures required and remove any statements from the public record that cover profits made.

A small business meets two out of these three criteria:

• Turnover below £10.2m p/a
• Net assets below £5.1m p/a
• Employee count below 50

Although a company using FRS 102 Section 1A can claim exemptions from certain reporting requirements, this is still a much more comprehensive report when compared to FRS 105.

A set of FRS 102 Section 1A accounts will include:

• Director’s report – not filed to Companies House
• Accountant’s report – not filed to Companies House
• Profit and loss account – not filed to Companies House
• Balance sheet
• Various disclosures
• Detailed profit and loss account – not filed to Companies House

When using this framework, it is important to remember two things:

• Although exempted, you may still file certain disclosures
• You must show true and fair records of the company at the reporting date

This means there may be cases where a company applies some of the exemptions available instead of all of them.

For example, some not for profit companies may wish to file their director’s report as they may include messages to various stakeholders, explaining how funds are being raised and used.

In other cases, a small company may have its accounts audited and therefore want to publish the auditor’s report.

In Summary…

You don’t need to submit any accounts to Companies House if you’re a sole trader.

However, you must keep certain records to help you complete your annual self-assessment tax return.

Although bookkeeping software (such as FreeAgent) can help you maintain your accounts, many sole traders use an accountant to allow them to focus on their business.

On the other hand, company directors have a legal obligation to ensure that their company accounts are submitted accurately and on time.

In addition to the Companies House filings we explain in this guide, the company must submit its full accounts to HMRC and pay any Corporation Tax due.

As a director, you must also file an annual self assessment return with HMRC to account for your personal tax.

Although it is possible to prepare company accounts yourself, many compelling reasons exist to use an accountant.

Integro Accounting offers comprehensive packages for both limited companies and sole traders.