FRS 105 Micro Entity Accounts in Bury St Edmunds

FRS 105 is the UK financial reporting standard that applies to companies using the micro-entities regime. It sets out the rules for recognising, measuring and presenting items in micro-entity financial statements, and it deliberately keeps disclosure to a minimum — typically a simplified balance sheet, a simplified profit and loss account and a small number of notes. It differs from FRS 102, which applies to a much wider range of companies and requires considerably more detail. FRS 105 only comes into play when a company qualifies for the micro-entities regime and chooses to apply it.

FRS 105 is intended for companies that both qualify for the micro-entities regime and decide to apply it. Qualification is based on the size conditions set out in company law and on certain rules and exclusions that can catch specific types of company or group. Meeting the size tests does not guarantee that the regime is available, and a qualifying company is never obliged to use it. It is worth checking your position each year, because a change in turnover, balance sheet total, headcount or company structure can affect which regime is open to you.

No. The micro-entities regime is an available accounting regime, not a mandatory one, so a company that qualifies is free to choose a different framework, such as the small companies regime under FRS 102. Choosing FRS 105 usually means less disclosure and a simpler set of financial statements, while a fuller framework can give more detail that lenders, investors or buyers may find useful. The right choice depends on who relies on your accounts and what you want them to show, which is why it is worth discussing the options rather than assuming one approach fits every company.

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. These are size conditions, not a complete test. Other rules and exclusions can apply depending on the type of company, whether it is part of a group, and the nature of its activities, so satisfying 2 of the 3 conditions on its own does not automatically mean a company can use the micro-entities regime.

FRS 105 is the standard for micro-entities and is the more streamlined of the two. It allows a simplified balance sheet and profit and loss account with minimal notes, and it applies certain measurement simplifications — deferred tax is not recognised, for instance, and financial instruments are generally carried at undiscounted cost rather than fair value. FRS 102 is a broader framework used by small, medium and larger entities, and it requires more disclosure and different measurement treatment in several areas. In short, FRS 105 is designed to reduce the reporting burden for the smallest companies, while FRS 102 provides a fuller picture.

The financial statements are the company's statutory accounts, and for most companies those accounts are filed at Companies House as part of the annual accounts requirement. Filing at Companies House is a separate step from dealing with HMRC: submitting your accounts does not settle your Corporation Tax position, and submitting a tax return does not satisfy the accounts filing obligation. Companies House has also been moving towards requiring small and micro-entity accounts to be filed using software rather than a paper or PDF submission, so it is worth checking the current guidance before you file.

Yes, they are two distinct things. FRS 105 Micro Entity Accounts are the statutory financial statements for the company, prepared under the accounting framework and filed at Companies House. A Corporation Tax Return, usually submitted as form CT600, is a tax filing made to HMRC that reports the company's taxable profits and calculates the tax due. The figures in the tax return normally start from the accounts, with adjustments where tax rules and accounting rules differ, which is why the two are prepared closely together but handled as separate filings with separate deadlines.

A useful starting point is a complete set of records for the accounting period: bank and credit card statements, sales invoices, purchase invoices and receipts, payroll information for directors and staff, details of any loans or hire purchase agreements, and records of assets bought or sold. It also helps to have the previous year's accounts, details of any share changes or dividends, and a note of stock or work in progress at the year end if the company holds any. The accounts are prepared from your financial records, so the more complete and up-to-date those records are, the more straightforward the process tends to be.