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Back to FAQSmall and Medium-Sized Company Exemptions

What Is a Small Or Medium-Sized Company?

Public companies and certain companies in the regulated sectors cannot qualify as small or medium-sized companies. For other companies, the size of the company (and in the case of a parent company the size of the group headed by it) in terms of its turnover, balance sheet total (meaning the total of the fixed and current assets) and average number of employees determines whether it is classed as small or medium-sized.

The exact conditions for qualifying as a small or medium-sized company are given below.

To be a small company, at least two of the following conditions must be met:

  • annual turnover must be £2,800,000 or less;
  • the balance sheet total must be £1,400,000 or less;
  • the average number of employees must be 50 or fewer.

***Please note: New accounting exemption thresholds apply to financial years ending on or after 30 January 2004.

To be a small company, at least 2 of the following conditions must be met:

  • annual turnover must be £5.6 million or less;
  • the balance sheet total must be £2.8 million or less;
  • the average number of employees must be 50 or fewer.

To be a medium-sized company, at least two of the following conditions must be met:

  • annual turnover must be £11,200,000 or less;
  • the balance sheet total must be £5,600,000 or less;
  • the average number of employees must be 250 or fewer.

***Please note: New accounting exemption thresholds apply to financial years ending on or after 30 January 2004.

To be a medium-sized company, at least 2 of the following conditions must be met:

  • annual turnover must be £22.8 million or less;
  • the balance sheet total must be £11.4 million or less;
  • the average number of employees must be 250 or fewer.

If the company is a parent company, it cannot qualify as a small or medium-sized company unless the group headed by it is also small or medium-sized.

Generally, a company qualifies as 'small' or 'medium-sized' in its first financial year, or in any subsequent financial year if it fulfils the conditions in that year and the year before. If the company ceases to be small or medium-sized, the exemption continues for the first year that the company does not fulfil the conditions. And the exemption continues uninterrupted if the company reverts to being small or medium-sized the following year.

If you think the company might qualify as small or medium-sized, you should consult a professional accountant before you prepare 'special-provision' accounts. If you abbreviate the accounts, you will also need a special auditor's report for filing with the Registrar, confirming that the company qualifies to produce such accounts. This report is not needed if the company is exempt from audit. Top Of Page


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