FRS 105 Micro Entity Accounts in East Lothian

FRS 105 is the UK financial reporting standard that applies to companies using the micro-entities regime. It sets out how the financial statements should be measured and presented, and which disclosures are required. It is deliberately stripped back compared with fuller frameworks: accounts are prepared on a historical cost basis, assets are not revalued, fair value accounting is not used, and the notes to the accounts are kept to a minimum. It is an accounting standard, not a tax return or a filing form, so it governs how the accounts look rather than how much tax is due.

FRS 105 is available to companies that qualify for the UK micro-entities regime and then choose to apply it. Qualification is based on the size conditions set out in company law, but size is not the only consideration — certain rules and exclusions can prevent a company from using the regime even if it looks small enough on the numbers. A company also has to actively adopt the regime; it does not apply by default. Because both the size test and the other conditions need to be checked, it is worth reviewing your position rather than assuming you either do or do not qualify.

No. Qualifying for the micro-entities regime does not force a company to use FRS 105. Directors can generally choose between the micro-entities regime and the small companies regime, which for many companies means FRS 102 Section 1A. The right choice depends on your circumstances — for example, whether you want the flexibility to reflect revaluations or fair value, whether anyone relying on the accounts needs more detail, or whether the simpler presentation under FRS 105 is simply more appropriate for the way the business is run.

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 during the period. Meeting the size conditions is not the end of the story — other eligibility rules and exclusions can apply, so two out of three on the numbers does not automatically mean a company can, or should, use the regime. It is always worth confirming your position for the specific period in question.

FRS 102 is a much fuller accounting framework used by many small and medium-sized companies, with FRS 102 Section 1A providing a lighter version for small companies. FRS 105, by contrast, is far more limited: it operates on a historical cost basis, does not permit revaluations or fair value accounting, and requires considerably fewer disclosures. FRS 102 offers more flexibility and more detail, which can be useful if lenders, investors or group companies need a richer set of accounts. The trade-off is more work and more disclosure. Choosing between them is really about what your accounts need to show and who will read them.

Companies are generally required to file annual accounts with Companies House, and accounts prepared under FRS 105 can be filed in the simplified format that micro-entity reporting allows. That said, filing obligations depend on the individual company — dormant companies, and companies covered by an exemption, are in a different position. It is also worth remembering that the accounts filed publicly are not always identical to the full accounts prepared for the directors and shareholders, because the micro-entity regime allows a reduced version to be delivered for filing.

Yes, they are separate documents with separate purposes. FRS 105 accounts are financial statements prepared under a reporting framework, while the CT600 is the Corporation Tax Return submitted to HMRC to report taxable profits and calculate the tax due. The figures are linked, because the tax return starts from the profit shown in the accounts and then applies tax adjustments, but the documents are prepared for different recipients and are subject to different rules and different deadlines. Preparing one well makes the other easier, but neither replaces the other.

Possibly, but it depends on the company's circumstances and on the conditions that apply to its particular accounting period, including how long that first period runs. A newly incorporated company with modest activity may well fall within the size conditions, but the other eligibility rules and exclusions still have to be considered, and the directors have to choose to adopt the micro-entities regime. It is also worth thinking about whether the simplicity of FRS 105 suits your plans — for example, if you expect investment, lending or rapid growth, a fuller framework may be a better long-term fit.