FRS 105 Micro Entity Accounts in Southworld: Clear Support for Qualifying Micro-Entities

FRS 105 is the UK financial reporting standard for companies that qualify for the micro-entities regime and choose to apply it. It sets out simplified rules for preparing financial statements, covering how the balance sheet is presented, how assets and liabilities are measured and which notes are needed. It exists alongside other frameworks such as FRS 102, which is used by most other small companies, and it is the standard that applies to your accounts once the micro-entities regime has been chosen.

FRS 105 is available to companies that qualify as micro-entities under the UK micro-entities regime and that decide to apply it. Qualifying depends on the company's size measured against the applicable conditions, together with other rules and exclusions that can affect whether the regime is open to a particular entity, so meeting the size tests alone is not an automatic green light. Directors also have a choice, because a company that qualifies can still prepare accounts under a different framework such as FRS 102 Section 1A. Eligibility is worth reviewing for each accounting period, since changes in turnover, headcount or balance sheet totals can move a company in or out of the regime.

For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least 2 of the 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. Meeting those conditions does not automatically mean the company qualifies, because other eligibility rules and exclusions can apply, and there are rules about entering and leaving the regime that can affect the position in a given year. We check these conditions as part of preparing the accounts.

No. The micro-entities regime is an available accounting framework rather than a mandatory one. A company that qualifies can choose to apply it, and FRS 105 applies when that choice is made. Some directors prefer the slightly fuller presentation and additional disclosures that come with FRS 102 Section 1A, particularly where lenders, investors or group companies expect more detail, or where the company is growing and wants consistency year on year. The decision rests with the directors, based on the company's circumstances and who is likely to read the accounts.

FRS 105 is the more streamlined of the two and is used by qualifying micro-entities. It permits a simpler set of accounting treatments, for example no fair value accounting for certain items, no revaluation of fixed assets and a more straightforward approach to deferred tax, and it requires fewer notes. FRS 102, usually Section 1A for small companies, offers more accounting policy options and asks for more disclosure. The accounts filed under FRS 105 are typically a balance sheet with supporting notes, while FRS 102 Section 1A accounts include additional statements and notes. Which framework suits your company depends on eligibility, your plans and the needs of the people reading your accounts.

Yes. If your company prepares accounts, they need to be filed with Companies House in line with the statutory requirement for its accounting reference date. Micro-entity accounts are usually filed in the micro-entity format, which typically consists of the balance sheet and the required notes, and a profit and loss account is normally still prepared for the company's own records and for tax purposes even though it is not generally included in what is filed. Filing dates and accepted filing formats are set by company law and can change, so it is worth confirming the current position for your period rather than relying on last year's notes.

Yes. FRS 105 Micro Entity Accounts are the statutory financial statements prepared under the micro-entities regime and are filed with Companies House. A CT600 is a Corporation Tax Return submitted to HMRC and is a separate filing, calculated from the company's taxable profits with any tax adjustments applied. The two are connected, because the accounts are usually the starting point for the tax computation, but they serve different purposes, go to different organisations and carry their own requirements and deadlines. Preparing the accounts does not by itself complete your Corporation Tax filing, and filing a CT600 does not discharge your accounts filing duty.

It can be possible for a newly incorporated company to prepare FRS 105 Micro Entity Accounts, but only if it qualifies for the micro-entities regime in that period and the directors choose to apply it. In a first accounting period there is often limited trading history, so the size conditions are considered on the basis of the period in question and the rules that apply around starting to trade. It is also worth thinking ahead: if the company expects rapid growth, outside investment or inclusion in a group, using a fuller framework from the outset may avoid having to change approach later. We can review the position with you before the first set of accounts is prepared.