This is part of a package of legal changes which apply to accounting periods commencing in 2016, but which can be applied a year earlier. Many small companies will wish to take advantage of other changes in the package and so will be obliged to make these changes for accounting periods commencing in 2015.
The Companies Act 2006 introduced a simpler method of reducing public disclosure by allowing small companies to ﬁle only selected pages from their full accounts.
Previously, all companies were required to prepare full accounts for their members (and these accounts were also submitted to HM Revenue & Customs with their tax computation). Abbreviated accounts were a second set of accounts prepared for the public record.
The Companies Act 2006 introduced a simpler method of reducing public disclosure by allowing small companies to file only selected pages from their full accounts.
The new regulations are designed to remove the need to prepare two sets of accounts.
a. are already subject to fewer disclosure requirements than previously;
b. may, with the consent of all members, prepare “abridged” accounts which follow simplified formats as their main accounts;
c. may then choose to omit the directors’ report and profit and loss account from the accounts to be filed (the legislation is not clear, but it is generally taken that this includes any notes which are related to the profit and loss account).
The combination of the three options achieve a broadly similar effect to the filing of abbreviated accounts, although there may be a slight increase in the overall level of disclosure.
The ability of small companies to prepare abridged accounts depends upon the annual consent of all members of the company, and the company is required to file a notice that all have so consented.
Small companies which intend to omit their directors’ report and profit and loss account from their filing, may conclude that the additional formalities around preparing abridged accounts are not worthwhile for the relatively minor further reduction in disclosure.
Prior to the removal of the profit and loss account, and whether abridged or not, the accounts prepared must still give a true and fair view and so may need to include disclosures in addition to those specified in the law.
Small companies which intend to omit their directors’ report and proﬁt and loss account from their ﬁling, may conclude that the additional formalities around preparing abridged accounts are not worthwhile for the relatively minor further reduction in disclosure.
When a small company is audited, the audit will cover the full accounts (whether or not abridged). There is no separate report on the accounts to be filed and, where pages are omitted from the filing, the audit report should also be omitted. However, a note must be added to the accounts giving details of the audit, identifying the auditor, and giving details of any qualification given (which must be quoted in full) or any other matters emphasised in the report.
Medium-sized companies were previously able to file a form of abbreviated accounts, although the exemptions were few. There is no equivalent under the new regime so that medium- sized companies will in future have to file their full accounts.
We can advise on the detailed effects of these changes. Please contact the partner who normally deals with your accounts.