FRS 105 Micro Entity Accounts in Romsey

FRS 105 is the UK financial reporting standard that applies to micro-entities. It sets out how a qualifying micro-entity should prepare its financial statements when it chooses to use the micro-entities regime, and it is deliberately simpler than the fuller standards available to larger companies. In practice it means a shorter balance sheet, a simplified profit and loss account and much reduced note disclosure, which keeps the accounts proportionate to the size and complexity of a very small company.

FRS 105 is available to companies that qualify as micro-entities and decide to apply the micro-entities regime. Qualifying is not simply a matter of being small: a company generally needs to meet at least two of the three applicable size conditions, and certain companies are excluded from the regime altogether — for example, some entities that are part of a group or that carry on particular types of activity. Eligibility can also change from year to year, so it is worth reviewing before each set of accounts is prepared rather than assuming the same treatment continues indefinitely.

For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least 2 of 3 applicable conditions to fall within the micro-entity size limits: 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 these size conditions does not automatically mean a company can use the regime, because other rules and exclusions can apply. Your specific circumstances should always be assessed before deciding how to prepare the accounts.

No. The micro-entities regime is an available accounting regime rather than a mandatory one. A company that qualifies may choose to apply it, but it is not obliged to. Some directors prefer to prepare accounts under FRS 102 even though they could use FRS 105, perhaps because of the way certain items are treated, because a lender or investor expects a particular presentation, or simply because they want consistency with previous years. The key point is that FRS 105 applies when the micro-entities regime is chosen.

Both are UK financial reporting standards, but they sit at different levels. FRS 102 is the standard used by most small and medium-sized companies and involves fuller recognition, measurement and disclosure requirements. FRS 105 is the micro-entities standard and is far more streamlined, with simplified formats and far fewer notes. Some accounting treatments also differ between the two — for example, how certain items are measured — so moving from one framework to the other can change the figures in the accounts, not just their presentation.

Normally, yes. A company's statutory accounts are prepared for its members and are then filed at Companies House in line with the company's filing obligations, alongside a separate Confirmation Statement. Filing accounts and filing a Confirmation Statement are two distinct requirements, and missing either can lead to penalties, so it is worth keeping track of both. The accounts filed are prepared under the framework the company has applied, such as FRS 105 where the micro-entities regime has been chosen.

Yes, they are separate. FRS 105 accounts are the statutory financial statements prepared under the accounting framework, while a CT600 is a Corporation Tax return submitted separately to HMRC. The CT600 starts from the company's profit figure, but it adjusts that figure for tax purposes, so the taxable profit is not necessarily the same as the profit shown in the accounts. Preparing the two alongside each other, but as distinct tasks, helps avoid confusion about which document is due to which body.

It helps to have complete records for the accounting period: bank and credit card statements, sales invoices and receipts, purchase invoices and expense records, payroll information if you employ staff, details of any assets bought or sold, loan agreements, and records of any amounts owed to or by the company. If you have been keeping software-based bookkeeping, we can normally work from exports and reports rather than a box of paperwork. The more complete and up to date the records are, the more straightforward the preparation tends to be, and the fewer follow-up questions are needed along the way.

A newly incorporated company can potentially use FRS 105 for its first set of accounts, but only if it qualifies as a micro-entity and the directors choose to apply the micro-entities regime. A first accounting period is often shorter or longer than twelve months, which can affect how the size conditions are assessed. It is also worth remembering that eligibility for the regime is not the same as being registered for Corporation Tax, and the two things are handled separately. Setting up good record keeping early makes the first set of accounts much easier.