FRS 105 Micro Entity Accounts in Threemilestone

FRS 105 is the UK financial reporting standard for micro-entities. It sets out how a qualifying company that has chosen to apply the micro-entities regime prepares its annual financial statements, using a simplified format with a shorter balance sheet, a shorter profit and loss account and minimal note disclosures compared with fuller statutory accounts. It sits alongside FRS 102, which is the standard used by most other companies. FRS 105 does not change your tax position — it changes how your accounts are prepared and presented — and it is not a substitute for a Corporation Tax Return.

For accounting periods beginning on or after 6 April 2025, a company generally needs to meet at least 2 of the following 3 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 assessed against the relevant rules, and other eligibility rules and exclusions can apply, so meeting the size thresholds on their own does not automatically mean a company qualifies. Earlier accounting periods were subject to lower thresholds, so it is worth checking which rules apply to the period in question before assuming anything either way.

No. The micro-entities regime is an available accounting regime, not a mandatory one. A company that qualifies for the regime can choose to apply it and prepare its accounts under FRS 105, or it can instead prepare accounts under FRS 102 — for example under the small companies regime. Some businesses prefer the fuller disclosure and measurement options available elsewhere, particularly where a lender, investor or group company expects a different format. The right answer depends on your circumstances, so it is worth discussing the options rather than defaulting to one framework.

FRS 105 is a much shorter, simpler standard designed specifically for micro-entities. Accounts prepared under it use a prescribed format with very limited disclosures, and measurement is largely on a historical cost basis, so revaluation of property, plant and equipment and fair value accounting for financial instruments are not available, and deferred tax is not recognised. FRS 102 is the fuller standard used by most companies, including small companies that prepare reduced-disclosure accounts under Section 1A. In short, FRS 105 trades flexibility and detail for simplicity — a good fit for many owner-managed companies, but not necessarily the right fit for every one.

Yes. A limited company must file its annual accounts with Companies House, and accounts prepared under the micro-entity regime in FRS 105 format are one accepted way of meeting that requirement, provided the company qualifies and has chosen to apply the regime. Filing the accounts is a separate obligation from filing a Confirmation Statement, and both are separate again from your Corporation Tax Return to HMRC. We can prepare the FRS 105 financial statements and handle the Companies House submission, while keeping the tax filing as a clearly distinct piece of work.

Yes, they are two different things. FRS 105 accounts are the statutory financial statements prepared under the micro-entities regime and filed with Companies House. A CT600 is the Corporation Tax Return submitted to HMRC, and it is based on the company's taxable profits rather than simply the profit shown in the accounts. Items such as disallowable expenditure, capital allowances and other tax adjustments mean the taxable figure can differ from the accounting profit. The accounts usually form the starting point for the tax computation, but the CT600 is prepared and submitted as its own exercise.

It can, if it qualifies for the micro-entities regime for the period in question and chooses to apply it. A newly incorporated company with modest activity will often fall within the size conditions, but eligibility is assessed against the rules and exclusions in force for that accounting period, so it is not automatic simply because the company is new or small. It is also worth thinking about the framework you expect to need over the next few years, particularly if you plan to raise finance or grow quickly, so that a change of framework later is not a surprise.

Useful starting points include your bookkeeping or trial balance, bank statements and reconciliations, sales and purchase records, payroll and employee numbers, stock and work-in-progress figures, details of fixed assets bought or sold during the period, loan and hire purchase agreements, and movements on director's loan accounts. If you have previous year's accounts, they help confirm opening balances and the framework that was used before. The more complete the records, the more straightforward the preparation tends to be — and we will tell you early if anything else is needed.