FRS 105 Micro Entity Accounts in Jarrow

FRS 105 is the UK financial reporting standard for micro-entities. It sets out how a qualifying company that has chosen to apply the micro-entities regime should prepare its annual financial statements. The standard is intentionally concise: it is built around a simplified balance sheet and a limited set of notes, so the accounts are shorter and more straightforward than those prepared under fuller frameworks such as FRS 102. FRS 105 is the standard; the micro-entities regime is the framework that decides who may use it.

FRS 105 Micro Entity Accounts are for companies that qualify for the micro-entities regime and then choose to apply it. Qualification depends on the size criteria plus the wider eligibility rules, and certain companies are excluded from the regime regardless of size. 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. Meeting those size conditions on its own does not automatically guarantee eligibility, so it is worth checking your specific circumstances before deciding.

No. The micro-entities regime is available, not compulsory. A company that qualifies for it still has a choice about whether to apply it. Some directors prefer the brevity of FRS 105, while others prefer a fuller framework because it gives a more detailed picture of the business or better matches what lenders, investors or group companies want to see. If a qualifying company decides not to use the micro-entities regime, it would report under a different framework. There is no requirement to use FRS 105 simply because you are small enough to do so.

Both are UK financial reporting standards, but they are aimed at different sizes of company and produce different accounts. FRS 102 is the framework used by a much broader range of businesses and allows or requires more accounting options, more measurement choices and considerably more disclosure. FRS 105 is the micro-entities standard: it is far more prescriptive about how items are treated and demands much less by way of notes. The practical result is that FRS 105 accounts are shorter and simpler to read, but they also carry less explanatory detail — which is precisely why some companies deliberately stay on FRS 102 instead.

Preparing FRS 105 financial statements and filing accounts with Companies House are two connected but separate steps. Once the accounts are prepared, a company's annual accounts normally need to be filed at Companies House, and micro-entity accounts can be filed in the reduced form the regime allows. The filing itself has its own format, content and timing requirements, which are governed by company law rather than by the accounting standard alone. It is worth confirming the current filing position for your company before submitting, as requirements and accepted filing methods do change over time.

Yes, they are separate. FRS 105 Micro Entity Accounts are the financial statements prepared under the micro-entities reporting framework and, in the normal course, filed at Companies House. A Corporation Tax Return, often referred to as a CT600, is a different document submitted to HMRC to report the company's taxable profits and work out the tax due. The starting point for the tax computation is usually the company's profit figure, but the accounts and the tax return serve different purposes, follow different rules in places, and can legitimately show different numbers. Preparing one does not automatically prepare the other.

A newly incorporated company can potentially use FRS 105, but it still has to qualify for the micro-entities regime and choose to apply it — being new does not create an exemption. In a first accounting period the company may have limited trading history and an unusual period length, so the size assessment needs care, and the relevant rules and exclusions still apply. It is also worth thinking about the longer term: if the business is expected to grow quickly or to attract outside investment, a fuller framework may be a better fit from the outset. The right answer depends on your particular plans.

In broad terms, the preparation is driven by your financial records for the period. Useful items include bank and credit card statements, sales and purchase records, payroll and employee information, details of any loans or finance agreements, fixed asset purchases and disposals, stock or work-in-progress figures where relevant, and any previous year's accounts. It also helps to confirm your year-end date, your company registration details, and any changes in the business during the period. Once your records are in place, the accounts can be built up in line with the framework your company has chosen, and the resulting figures can then be reviewed with you before anything is finalised.