FRS 105 Micro Entity Accounts in Broadstairs

FRS 105 is the UK financial reporting standard for micro-entities. It is designed to be the simplest of the UK accounting frameworks, allowing qualifying companies to prepare financial statements on a largely historical cost basis with significantly reduced disclosure. It works hand in hand with the micro-entities regime: the regime is the accounting route a company chooses, and FRS 105 is the standard it applies when preparing its accounts under that route.

FRS 105 is intended for companies that qualify for the micro-entities regime and choose to apply it. Eligibility depends on meeting the micro-entity size conditions and on not being excluded for another reason. For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least 2 of 3 applicable 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. Other rules and exclusions can apply, so meeting the size conditions alone does not automatically mean a company qualifies.

No. The micro-entities regime is an available accounting regime rather than a mandatory one. A qualifying company can choose to apply it and prepare FRS 105 Micro Entity Accounts, or it can prepare its accounts under a fuller framework such as FRS 102. The right choice depends on factors such as who uses the accounts, whether the company needs to show fair values or revaluations, what its lenders or investors expect, and whether group or parent company considerations apply.

FRS 102 is a fuller reporting standard and allows or requires a wider range of accounting treatments, including fair value measurement in certain cases, revaluations, deferred tax and more extensive disclosures. FRS 105 is deliberately narrower and simpler: assets are generally held at historical cost, there is no revaluation or fair value option, deferred tax is not recognised, and the notes are much shorter. The trade-off is that FRS 105 accounts give readers less information, which is why some companies prefer FRS 102 even when they could use FRS 105.

A company that prepares accounts under the micro-entities regime still has its usual statutory filing obligations, and micro-entity accounts can be filed with Companies House. The accounts filed are normally the balance sheet and the required notes, prepared in line with FRS 105 and signed off in accordance with the applicable rules. This is separate from anything sent to HMRC, and meeting the Companies House requirement does not by itself satisfy any other filing obligation the company has.

Yes, they are two distinct things. FRS 105 Micro Entity Accounts are the company's statutory financial statements, prepared under the micro-entities framework and generally filed with Companies House. A CT600 is a Corporation Tax Return submitted separately to HMRC to report the company's taxable profits and calculate the tax due. The figures in the accounts usually inform the tax return, but preparing or filing one does not replace the other, and each has its own requirements and deadlines.

A newly incorporated company can potentially use FRS 105, but eligibility is assessed against the micro-entity conditions and any relevant exclusions rather than assumed because the company is new. In the first period, the size tests are applied using the relevant rules for that period. A sensible approach for a new company in Broadstairs is to look at expected turnover, the balance sheet position and employee numbers, then confirm the position before the first set of accounts is prepared.

In practice we need a clear picture of the company's finances for the period: accurate bookkeeping or accounting records, bank statements, sales and purchase information, details of any fixed assets and how they were acquired, outstanding debtors and creditors, stock where relevant, loan balances and any share capital details. We may also ask about the previous year's accounts, the company's accounting reference date and how the business has been structured. Having records complete and up to date makes the preparation of FRS 105 Micro Entity Accounts considerably smoother, and it also helps ensure the figures are consistent with what is reported elsewhere.

Companies House has been moving towards accounts being filed digitally in a structured format, with a growing emphasis on accounts being prepared and submitted through compatible software rather than typed or uploaded as simple documents. For micro-entities, this means the way accounts are produced and filed is likely to matter more than it used to, and it is worth keeping your records and software arrangements under review. We can talk you through what these developments mean for your FRS 105 Micro Entity Accounts and help you stay organised ahead of them.