FRS 105 Micro Entity Accounts in Pudsey — Prepared for Qualifying Micro-Entities

FRS 105 is the UK financial reporting standard that applies to micro-entities. It sets out how a qualifying company's annual financial statements should be prepared when that company chooses to use the micro-entities regime, covering the format of the accounts, how items such as assets, liabilities, income and expenses are measured, and which notes and disclosures are required. It is a simplified framework, so the resulting financial statements are usually shorter and more straightforward than those prepared under the frameworks used by larger companies. FRS 105 sits alongside company law, which governs whether a company qualifies as a micro-entity in the first place.

FRS 105 is intended for companies that qualify for the micro-entities regime under UK company law and then choose to apply it. For accounting periods beginning on or after 6 April 2025, a company will generally need 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 during the period. Other eligibility rules and exclusions also apply, which is why meeting the size conditions alone does not guarantee that a company qualifies. It is always worth checking your specific position, particularly if your company sits within a group or carries on a regulated activity, before assuming the micro-entities regime is available to you.

No. The micro-entities regime is an available accounting regime rather than a mandatory one. A company that qualifies as a micro-entity can generally choose to apply the micro-entities regime, in which case FRS 105 is the standard used, or it can prepare its accounts under a different framework such as the small entities provisions of FRS 102. The choice usually comes down to what best suits the company's circumstances, the level of disclosure the owners are comfortable with, and the needs of anyone who relies on the accounts. Once a framework is adopted, it should be applied consistently, and eligibility needs to be considered for each accounting period.

Both are UK financial reporting standards, but they are aimed at different sizes of company. FRS 105 is the micro-entities standard and is deliberately streamlined: it generally allows fewer accounting options and requires far fewer disclosures, which keeps the financial statements shorter and easier to follow. FRS 102 is the broader standard, and the small entities provisions within it give companies more flexibility on certain accounting treatments, alongside a more extensive set of disclosure requirements. In practice, choosing between them affects how some items are measured and how much information ends up in the notes, even where the underlying profit figure is very similar. Neither is inherently better — the right one depends on your company's circumstances and what the accounts need to do for you.

Preparing FRS 105 accounts and filing accounts with Companies House are two related but separate steps. FRS 105 determines how the financial statements are drawn up; company law determines whether accounts have to be filed, when they are due, and in what form. Where a company is required to file accounts, micro-entity accounts can normally be filed using the relevant option available for that company. Companies House has also been making changes to accounts filing, including a shift towards filing through compatible software and changes to the filing options available, so it is worth confirming the current position for your accounting period. Filing acceptance is always a matter for Companies House rather than something we can guarantee.

Yes, they are separate obligations. FRS 105 Micro Entity Accounts are financial statements prepared under the micro-entities accounting framework, while a CT600 is a Corporation Tax Return submitted to HMRC to report the company's taxable profits and calculate the tax due. The figures in the accounts often provide the starting point for the tax return, but the return may include adjustments that do not appear in the financial statements, and the deadlines and submission routes are different. Keeping the two clearly separated in your own mind helps avoid confusion about what has been filed, with whom, and by when.

It is possible for a newly incorporated company to use FRS 105, but only if it qualifies as a micro-entity for its accounting period and chooses to apply the micro-entities regime. New companies often fall comfortably within the size conditions, but that is not guaranteed, and the other eligibility rules and exclusions still need to be considered. A first accounting period that is shorter or longer than 12 months can also affect how the turnover condition is assessed, as the threshold is generally adjusted to reflect the length of the period. Because the first set of accounts sets the tone for later periods, it is worth taking advice early rather than assuming the regime applies automatically.

Good records make the process much smoother. Useful information typically includes bank and credit card statements for the period, sales invoices and receipts, purchase invoices and expense receipts, payroll records and details of any employee benefits, loan and finance agreements, details of assets bought or sold, stock or work-in-progress information where relevant, and any previous year's accounts. If you use accounting software, granting us access is often the quickest route. It also helps to know your company's accounting reference date, whether anything unusual happened during the period, and whether there are any transactions with directors or connected parties. We will tell you exactly what is needed once we understand your circumstances.