FRS 105 Micro Entity Accounts in Bridgwater

FRS 105 is the UK financial reporting standard that applies to companies using the micro-entities regime. It is a simplified framework that sets out how a micro-entity measures and presents the items in its financial statements and what it must disclose. Compared with the standards used by larger companies, it involves less complexity: fewer accounting options, reduced disclosure and a more straightforward approach to preparing the balance sheet and profit and loss account. It is important to understand that FRS 105 does not apply to every small company automatically — it applies when a company qualifies for the micro-entities regime and chooses to use it.

FRS 105 is intended for companies that qualify for the micro-entities regime and decide to apply it. For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least 2 of 3 applicable size 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. Meeting those size tests is not the whole story, though — other eligibility rules and exclusions can apply, and some companies are not permitted to use the regime regardless of size. That is why eligibility should be checked against your company's specific circumstances rather than assumed from turnover alone.

No. The micro-entities regime is an available accounting regime rather than a mandatory one. A company that qualifies can choose to apply it, and FRS 105 is the standard that applies when that choice is made. A qualifying company may instead prepare its accounts under another framework, such as FRS 102, and some companies do so deliberately — for example, where a lender, investor or group parent prefers a different presentation, or where the company wants to apply accounting treatments that FRS 105 does not permit. The key point is that the framework should be selected consciously and applied consistently.

FRS 102 is the general financial reporting standard for most UK companies, while FRS 105 is a lighter framework for qualifying micro-entities. FRS 105 removes a number of options and complexities available under FRS 102 — for example, it does not permit revaluation of assets or the use of fair value accounting in the same way, and it requires considerably fewer disclosures. FRS 102 also has a reduced-disclosure variant often used by small companies, which sits between the two in terms of complexity. In practice, the difference usually shows up in the length and detail of the financial statements and in which accounting treatments are available.

For a limited company, statutory accounts need to be filed at Companies House, and micro-entity accounts prepared under FRS 105 can be filed in the appropriate format for that regime. Filing the accounts is a separate process from preparing them, and separate again from dealing with Corporation Tax. It is worth checking the current Companies House guidance for the filing options available to your company, because the way accounts can be submitted has been changing. Filing at Companies House is not approval of the accounts by anyone — it is simply the public record of the company's filed financial statements.

Yes, they are two distinct things. FRS 105 accounts are the company's financial statements, prepared under the accounting framework and filed at Companies House. A Corporation Tax Return, usually submitted as a CT600, is a tax filing made to HMRC, and the figures in it typically begin with the profit shown in the accounts before being adjusted for tax purposes — for example, for disallowable expenses or capital allowances. The accounts and the tax return can be prepared together from the same records, but they serve different purposes, go to different bodies and follow different rules.

A newly incorporated company may be able to use FRS 105 for its first accounting period if it qualifies for the micro-entities regime and chooses to apply it. A brand-new company with no trading history is often comfortably within the size limits, but eligibility is not decided on size alone, and exclusions can still apply. Some companies are part of a group or are otherwise caught by rules that prevent them from using the regime. It is also worth thinking ahead: if the business grows quickly, the company may move out of the regime in a later period, so building records that can support either framework is a sensible approach.

We usually need a clear picture of everything the company has earned, spent, owns and owes during the period. In practice that means bookkeeping or accounting records, bank statements and reconciliations, sales and purchase details, payroll information if the company employs anyone, details of asset purchases and disposals, loan and finance agreement information, director's loan account movements, VAT records where relevant, and the previous year's accounts if there are any. The more complete and organised the records, the more straightforward the preparation tends to be — and the easier it is to explain the figures in the finished accounts.

Companies House has been introducing changes to the way accounts are filed, including a shift towards filing through software and a longer-term direction of travel towards more detailed digital filing for small and micro-entity companies. Because the detail and timing of these changes can be updated, and because transitional arrangements may apply, the safest approach is to check the current Companies House guidance before you file rather than relying on what applied in previous years. We keep an eye on these developments so that FRS 105 Micro Entity Accounts in Bridgwater are prepared and filed in line with the requirements in force at the time.