FRS 105 Micro Entity Accounts in Cirencester

FRS 105 is the UK financial reporting standard that applies to companies using the micro-entities regime. It sets out how qualifying micro-entities prepare their annual financial statements and is the simplest of the UK accounting frameworks. In most cases it results in a short set of accounts, typically a balance sheet, a profit and loss account and limited notes, with certain accounting treatments restricted so the figures stay close to the company's straightforward transaction history. It is a reporting framework rather than a tax return, and it does not by itself determine how much tax a company pays.

Companies that qualify for the UK micro-entities regime and decide to apply it can use FRS 105. Qualification is mainly about size, but it also depends on the specific rules and exclusions that apply to the regime. A company that meets the size conditions still needs to confirm that nothing else prevents it from using the micro-entities regime, and the directors need to be comfortable that the framework suits how the business should report. This is reviewed on a company-by-company basis rather than assumed, because being small does not automatically mean a company qualifies.

No. The micro-entities regime is an available option for qualifying companies, not something imposed on them. A company that qualifies can choose to apply the micro-entities regime and therefore FRS 105, or it can prepare its accounts under a different framework such as FRS 102. There are practical reasons a qualifying company might prefer a fuller framework, for example where lenders, investors or group reporting require more detail. The important point is that eligibility and choice are two separate things, and the choice should be made deliberately.

For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least 2 of the following 3 conditions: turnover of no more than £1 million, a balance sheet total of no more than £500,000, and an average of no more than 10 employees during the period. Those are the size tests, and they operate alongside the wider rules and exclusions that apply to the micro-entities regime. Meeting 2 of the 3 conditions does not automatically mean a company qualifies, so it is worth checking your specific position, particularly if you are close to a threshold or your figures have moved around recently.

Both are UK financial reporting standards, but they are aimed at different sizes of company and produce different levels of detail. FRS 105 is the micro-entities standard: it allows a shorter set of financial statements with fewer disclosures and restricts certain accounting treatments. FRS 102 is used by small and larger entities, including the small companies regime under Section 1A, and it permits more accounting options while requiring more disclosure. In short, FRS 105 is simpler and more prescriptive, whereas FRS 102 is more flexible and more detailed. Which one applies depends on the regime the company qualifies for and chooses to use.

Annual accounts prepared under FRS 105 are filed with Companies House, by the statutory filing deadline that applies to the company. A Corporation Tax Return (CT600) is a separate submission to HMRC and serves a different purpose: it reports the company's taxable profits and calculates the corporation tax due. Although both draw on the same underlying financial information, they are distinct obligations with distinct requirements and deadlines, and completing one does not discharge the other. A company using the micro-entities regime still has to deal with its Corporation Tax filing, and it may also have other obligations such as a Confirmation Statement.

It can, if it qualifies for the micro-entities regime and chooses to apply it. Many newly incorporated companies are small enough to meet the size conditions in their early periods, but qualification is not guaranteed and the wider rules and exclusions still apply. First-year accounts can raise their own questions, for example around the length of the first accounting period, start-up costs and how the figures are presented, so it is usually worth discussing the framework early rather than at filing time. If the company later grows beyond the size conditions, the framework will need to change, and that is easier to manage when you can see it coming.

Typically we would ask for your bookkeeping or accounting records for the period, bank statements, sales and purchase documentation, payroll and employee information, details of any assets purchased or sold, loan and director's loan account movements, stock or work-in-progress figures, and the previous year's accounts where they exist. If the company is registered for VAT, VAT returns can help confirm the sales figures. Having your records in reasonable order speeds things up considerably, and where there are gaps we can talk through what is missing and what the most practical way forward is. The aim is to build financial statements that genuinely reflect your company's transactions for the period.