Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors

How might the changes to company size thresholds affect your business?

From October 2024, company size thresholds are to increase by 50%. For each
company, these new thresholds will begin to apply from the start of the next
accounting period commencing on or after 1 October 2024. But what are the
implications of these changes to your company?

The Companies Act 2006 makes requirements for what is included in the accounts
that are filed at Companies House. These requirements are split into four categories
or regimes based on the size of the company. These four sizes are described as
micro-entity, small, medium-sized, and large.

A company generally falls into one of those four categories based on its turnover and
Balance Sheet total. The larger the company, usually the more requirements there
are as to what is included in the accounts.

The increase in the thresholds means that some businesses will move down a
category.

The small company audit exemption in section 477 of the Companies Act 2006 directly
references the small company thresholds in section 382 of the Act. The audit exemption
threshold will therefore rise accordingly, meaning some entities will fall out of the audit
requirements.

At first glance this is good news as it means reduced requirements for the accounts.
However, there may be reasons why a company might decide not to take advantage
of the change.

For instance, if a company is growing rapidly, stepping down a category may only be
temporary. Because some reporting requirements rely on ongoing processes, it may
be inconvenient to stop those processes only to have to start them a year or so down
the line.

There are also considerations around audit exemptions, if a company no longer
needs an audit, it may consider its options. An audit can bring many elements of
added value such as:

  • Identifying weaknesses in internal controls
  • Identifying where profitable changes can be made
  • Lends credibility to financial statements
  • Educates business owners
  • Increases stakeholder confidence.

If you have any concerns about how the changes might affect your company, please feel free to contact us. We would be very happy to help advise you on the most suitable regime for your company.