FRS 105 Micro Entity Accounts in Clitheroe

FRS 105 is the UK financial reporting standard for micro-entities. It sets out how a qualifying company's annual accounts should be prepared when that company chooses to apply the micro-entities regime. Compared with fuller standards, it is deliberately simplified: assets are generally held at historical cost, there is no fair value or revaluation accounting and no deferred tax, and the number of required notes and disclosures is much smaller. In exchange, the accounts give a streamlined view of the company's financial position and performance.

FRS 105 is intended for companies that qualify for the UK micro-entities regime and that choose to apply it. Qualifying is not just about size — certain companies are excluded from the regime regardless of their figures. If your company qualifies and the regime is chosen, FRS 105 is the standard its financial statements are prepared under. If it does not qualify, or if you decide the regime is not right for you, a fuller standard such as FRS 102 would normally apply instead.

No. The micro-entities regime is an available accounting regime for qualifying companies rather than a requirement. A company that meets the size conditions can choose to apply it, and FRS 105 applies when that choice is made. Some qualifying companies opt for FRS 102 instead, for example where they want to present revalued assets, use fair value measurement, or provide more detailed disclosures for lenders or investors. The decision is normally reviewed each accounting period, since circumstances change.

For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least 2 of the 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 the size conditions is not the whole picture, though. Other eligibility rules and exclusions apply — for example, certain group structures, financial institutions, investment undertakings and companies required to prepare consolidated accounts — so the criteria should be checked against your company's specific situation.

Both are UK financial reporting standards, but they sit at different levels of complexity. FRS 105 is the micro-entity standard: historical cost only, minimal disclosures, and a short set of accounts. FRS 102 is the standard for larger small companies and other entities, and it permits or requires more — including revaluations, fair value measurement in certain cases, deferred tax and significantly more disclosure. Choosing FRS 102 generally means more detailed accounts and more work, which is why companies that qualify for the micro-entities regime often prefer FRS 105.

Where a company prepares its statutory annual accounts under FRS 105, those accounts are the ones submitted to Companies House as part of its annual filing obligation. It is worth separating this from tax: the Corporation Tax Return (CT600) is a distinct submission made to HMRC, prepared under tax rules rather than accounting standards, and the confirmation statement is a separate filing again. The accounts, the CT600 and the confirmation statement each serve a different purpose and have their own requirements.

A newly incorporated company can apply the micro-entities regime and FRS 105 if it qualifies and chooses to do so — there is no minimum trading history required. That said, a company with no trading activity, an unusual structure, or plans that might affect its size should look at the eligibility rules carefully before assuming FRS 105 is appropriate. In the first year it is also worth thinking ahead, because a company's size can change and the framework is normally reconsidered each period.

In most cases you will need the company's bank statements and transaction records for the period, sales and purchase records, payroll information if the company employs anyone, details of any equipment or other assets held, and information about loans, directors' balances or other liabilities at the year end. It also helps to have the previous year's accounts and any relevant correspondence to hand. Providing complete, well-organised records makes the preparation process smoother and reduces the chance of queries later on.

Companies House has been moving towards digital filing of accounts, with plans for accounts to be submitted through software in a structured, machine-readable format rather than as a simple PDF or paper copy. For micro-entity companies this is likely to change how accounts are filed, even though the underlying accounting under FRS 105 stays broadly the same. The exact timings and any transitional arrangements are set by Companies House and HMRC, so it is worth checking the current position or asking your accountant what it means for your filing.