FRS 105 Micro Entity Accounts in Sissinghurst: Clear, Accurate Financial Reporting for Qualifying Micro-Entities

FRS 105 is a UK financial reporting standard that sets out how qualifying micro-entities should prepare their annual financial statements when they choose to apply the micro-entities regime. It is intentionally simple. Accounts prepared under FRS 105 are generally based on historical cost, so assets are not revalued and fair value adjustments are not made for most items. There is no deferred tax accounting, and the required disclosures are limited to a short prescribed set. The result is a concise balance sheet with minimal notes. FRS 105 is an accounting framework, not a tax return, and choosing it does not change the company's tax liabilities — it changes how the financial statements are prepared and presented.

FRS 105 is intended for UK companies that qualify for the micro-entities regime and decide to apply it. Two separate things need to be true: the company must be within the scope of the regime, and it must choose the micro-entities accounting framework rather than an alternative such as FRS 102 Section 1A. Certain types of company are excluded from the regime altogether, and there are rules about group structures and the nature of the company's activities that can affect eligibility. Meeting the size conditions is a key part of the test, but it is not the whole test, so it is worth confirming your position rather than assuming that a small company automatically qualifies.

No. The micro-entities regime is an available accounting regime, not a mandatory one. A company that qualifies as a micro-entity can generally choose between FRS 105 and other frameworks, most commonly FRS 102 Section 1A, which is designed for small entities. Some companies prefer FRS 102 Section 1A because it allows more flexibility — for example, revaluation of fixed assets, fair value measurement in certain cases and deferred tax recognition — and can provide more information for lenders, investors or anyone reading the accounts. Others prefer FRS 105 for its simplicity and shorter disclosure requirements. Whichever route is chosen, it is an accounting policy decision that should be applied consistently.

For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least 2 of 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. These conditions are the starting point rather than the full picture. Other rules and exclusions can apply, so a company that meets two or even all three of the size conditions may still fall outside the regime — for example because of the type of company it is, or because of its connections to other entities. It is also worth noting that thresholds and rules can change over time, so the position should be checked for the specific accounting period in question.

FRS 102 is the broader UK accounting standard that applies to a wide range of entities, with Section 1A providing a lighter-touch version for small companies. FRS 105 sits below that in terms of complexity. Under FRS 105, accounts are prepared on a historical cost basis with no revaluations, no fair value accounting for most items and no deferred tax, and the disclosure requirements are deliberately minimal. Under FRS 102 Section 1A, there is more scope for revaluation and fair value measurement, deferred tax is recognised, and the disclosure requirements are more extensive. In short, FRS 105 produces simpler, shorter accounts, while FRS 102 Section 1A gives more flexibility and more detail — which is why the choice often comes down to what the company and its readers actually need.

Yes. A company that prepares its annual accounts under FRS 105 still has to file those accounts with Companies House for the relevant financial year. Choosing FRS 105 affects the form and content of the accounts — for example, the balance sheet format and the limited disclosures — but it does not remove the filing obligation itself. Filing accounts is also separate from filing a Confirmation Statement, which confirms company details rather than reporting financial performance. The way accounts are filed is evolving, with a growing emphasis on filing through compatible software rather than paper or PDF attachments, so it is sensible to check the current filing guidance for your period before you submit.

Yes, they are two distinct exercises with different purposes and different recipients. FRS 105 Micro Entity Accounts are the company's statutory financial statements, prepared under the micro-entities reporting framework and filed with Companies House. A Corporation Tax Return (CT600) is a tax filing submitted to HMRC, and the tax computation typically begins with the profit figure from the accounts before adjustments are made for tax purposes. Because the accounts feed into the tax computation, the two are closely connected in practice, and they are often prepared together — but one does not replace the other, and neither should be treated as a substitute for the other.

Possibly, but not automatically. A newly incorporated company is not excluded from the micro-entities regime simply because it is new, and many first-year companies do fall within the size conditions. However, the same eligibility rules and exclusions apply as for any other company, so the framework should be considered on its own merits rather than assumed. It is also worth thinking ahead: if you expect turnover, your balance sheet total or your headcount to grow, or if the company's structure changes, your eligibility for the micro-entities regime could change in future periods. Checking the position at the outset, and reviewing it each year, is the practical approach.