FRS 105 Micro Entity Accounts in Melrose

FRS 105 is the financial reporting standard that applies to UK companies using the micro-entities regime. It is deliberately short and simple compared with standards aimed at larger businesses. It works on a historical cost basis, so assets and liabilities are generally carried at cost rather than revalued, and it removes much of the note disclosure you would expect under FRS 102. The aim is proportionate reporting: financial statements that show what the company owns, owes, earns and spends without unnecessary complexity. If your company qualifies as a micro-entity and the directors decide to adopt the micro-entities regime, FRS 105 is the standard used to prepare those accounts.

FRS 105 is intended for companies that qualify as micro-entities and then choose to apply the micro-entities regime — both parts matter equally. Size is only the starting point, because the rules also exclude certain companies and corporate structures, and eligibility is normally assessed over more than one financial year. A company that qualifies is not obliged to use FRS 105; it may instead prepare accounts under another framework, such as FRS 102 Section 1A for small entities. Many owner-managed companies in Melrose find FRS 105 attractive because the accounts are simpler to prepare and easier to read, but the right choice depends on the company's circumstances, its plans, and the information its shareholders and lenders need.

For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least 2 of 3 applicable conditions to qualify as a micro-entity: 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. The way these conditions are tested can involve both the current and the preceding financial year, so one strong year of growth does not automatically take a company out of the regime, and one quiet year does not automatically bring it in. Other rules and exclusions also apply, which is why it is worth having your position reviewed rather than assuming the thresholds tell the whole story.

No. The micro-entities regime is an option that qualifying companies can choose, and FRS 105 applies when that choice is made. A company that qualifies may decide that the extra detail and flexibility available under a small-company framework suits it better. Circumstances that often prompt a rethink include plans to raise finance, a lender or investor asking for more disclosure, group structures, or transactions that are easier to present under a different standard. The decision is made by the directors and can change from one accounting period to the next, so it is worth revisiting rather than treating as permanent.

FRS 102 is a broader standard used by a wide range of UK companies, with a small-entity variant (Section 1A) that many small companies apply. It allows more measurement choices — including revaluation of certain assets, fair value accounting in specified cases, and recognition of deferred tax — and it asks for considerably more disclosure in the notes. FRS 105 is narrower and simpler: historical cost, minimal notes, and a shorter set of financial statements. The trade-off is flexibility. FRS 105 gives you less room to present items in a particular way, but it also means less preparation work and accounts that a reader can take in at a glance.

Yes, in the normal course a company's accounts — including micro-entity accounts prepared under FRS 105 — must be delivered to Companies House for the relevant accounting period, within the statutory deadline that applies to that company. The accounts also go to the company's shareholders, and a copy forms part of the information provided to HMRC alongside the tax return. Filing the accounts is separate from other obligations such as the Confirmation Statement and the Corporation Tax Return, each of which has its own requirements. Because filing dates depend on the company's year end and whether it is a first period, we confirm the relevant dates for your company as part of the work.

Yes. FRS 105 Micro Entity Accounts are the company's financial statements, prepared under the micro-entities regime. A CT600 is a Corporation Tax Return submitted to HMRC, and it is a different document with a different purpose. In practice the two are connected: figures from the accounts feed into the tax computations that support the return, with adjustments for items treated differently for tax. Both need to be prepared and submitted, and a problem with one can affect the other, so it usually makes sense to deal with accounts and tax together even though they are distinct filings.

Good accounts come from good records. We would typically ask for bank and credit card statements covering the full period, sales and purchase records, payroll summaries, details of any loans or hire purchase agreements, invoices for equipment or vehicles bought or sold, stock or work-in-progress figures where relevant, and the previous year's accounts or opening balances for an existing company. If you already use bookkeeping or accounting software, giving us access to it usually speeds things up. Anything unusual — a director's loan, a one-off payment, a change of accounting period — is worth flagging early so it can be treated correctly and explained clearly in the financial statements.