FRS 105 Micro Entity Accounts in Stonehouse

FRS 105 is the UK financial reporting standard that applies to companies using the micro-entities regime. It sets out a simplified basis for preparing financial statements, including a prescribed format for the balance sheet and profit and loss account and a much shorter set of disclosure notes than larger frameworks require. It also restricts certain accounting options — for example, revaluation and fair value measurement are not available — which keeps the accounts simpler and more consistent from year to year.

FRS 105 is available to companies that both qualify for the UK micro-entities regime and choose to apply it. Qualifying is about size, but it is not only about size: certain companies are excluded from the regime, and the rules around groups and particular activities can affect whether a company is eligible. Directors also have a genuine choice — a qualifying company may instead prepare accounts under a fuller framework such as FRS 102. Because eligibility depends on your specific circumstances, it is worth reviewing before each set of accounts is prepared.

No. The micro-entities regime is an available accounting regime, not a mandatory one. A company that qualifies can choose to apply it, and FRS 105 applies when that choice is made. Some qualifying companies deliberately opt for a fuller reporting framework because their bank, an investor or another stakeholder wants more detail in the accounts. The decision belongs to the directors, and it can be revisited in later years as circumstances change.

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. Those figures are the size tests, but they are not the whole picture. Additional eligibility rules and exclusions can apply — for instance, companies that are part of an ineligible group or that carry on certain regulated activities may be prevented from using the regime. Meeting two of the three conditions therefore does not automatically confirm eligibility, and directors should consider the rules in full for each period.

FRS 102 is a broader financial reporting standard used by many small and medium-sized companies, and it offers more accounting policy choices and requires more disclosure. FRS 105 is the micro-entities standard: simpler, more prescriptive, with a shorter balance sheet and profit and loss format and far fewer notes. In practice, choosing between them is a trade-off — FRS 105 keeps preparation leaner, while FRS 102 produces fuller information that some lenders, investors or group companies find more useful.

Micro-entity accounts are generally filed at Companies House as part of a company's annual accounts filing, but the filing obligation and the form it takes depend on the company and the rules in force at the time. Filing the accounts is separate from dealing with Corporation Tax, and separate again from the annual Confirmation Statement, which confirms company details rather than reporting financial results. Filing routes and formats for small and micro-entity accounts have been changing, so it is worth checking the current requirements for your period before you submit.

Yes, they are two distinct things. FRS 105 accounts are the statutory financial statements prepared under the micro-entities framework, while the CT600 is the Corporation Tax return submitted to HMRC. The two are connected in the sense that the accounts usually form the starting point for calculating taxable profit, but adjustments — such as disallowable expenses or capital allowances — mean the tax figures often differ from the accounting figures. Preparing the accounts does not, on its own, complete your Corporation Tax obligations.

A newly incorporated company can potentially use FRS 105, but eligibility still has to be assessed. In the first period, size conditions are looked at in the way the rules require, and the same exclusions apply — so a new company that is part of a larger group, for example, may not be eligible even if it is very small. It is also worth thinking about what the accounts will be used for: if you are seeking finance early on, a fuller set of accounts under FRS 102 may be more helpful. We can review your position and talk through the options before your first year-end.

As a starting point, we need complete and accurate records for the period: bookkeeping or accounting software data, bank and credit card statements, sales and purchase records, payroll and employee information, details of any loans or hire purchase agreements, stock and asset information, and any relevant correspondence such as prior year accounts. It also helps to know how the accounts will be used and whether anyone such as a lender or investor has specific expectations, since that can influence whether FRS 105 remains the right choice for the year.