Audit exemption guidance
There are three ways a company or LLP might qualify for audit exemption:-
1 Small companies
If a company or LLP qualifies as small (see small entity qualification criteria below) it is able to claim audit exemption providing:-
- it is not part of a medium sized or large group (see below for small group limits); and
- members representing 10% or more of the nominal value of the company's issued share capital, or any class of it, have not requested an audit.
2 Parent guarantee
A subsidiary of a UK company or LLP is able to claim audit exemption if their parent guarantees their liabilities at the balance sheet date.
Please contact the technical team if you are thinking of using this exemption to confirm you will qualify and for details of the conditions to be met.
3 Dormant companies
Dormant companies and LLPs qualify for audit exemption. Any transaction means they will not meet the definition of dormant unless it is for the initial share capital or certain Companies House fees (eg confirmation statement).
Small entity qualification criteria
For its first period, a company is small if it meets 2 of the limits. Afterwards, a company starts or stops being small if it meets 2 of the limits for 2 consecutive years. Pro rata the turnover limit for long or short periods.
- Turnover - £10.2m
- Balance sheet total (fixed plus current assets) - £5.1m
- Average number of employees - 50 (actual number of people, not FTE)
Parent companies have to meet these limits plus the group they head must be small (including overseas subsidiaries).
A group is small if it meets the above criteria on a net basis (after consolidation adjustments) or these limits plus 20% for turnover and balance sheet total on a gross basis (pre consolidation adjustments).
The following cannot be small entities -
- Plcs
- insurance companies
- banking companies
- e-money issuers
- a MiFID investment firm or a UCITS management or companies that are a scheme funder of a Master Trust scheme.