Medium sized groups beware!
Small and medium sized groups of companies have benefited from an exemption not to have to produce and file group consolidated accounts. However this is all about to change for medium sized groups as this exemption has just been abolished by The Companies Act 2006.
For accounting periods commencing on or after 6 April 2008 medium sized groups will be required to prepare and file consolidated group audited accounts. The medium size criteria is defined by considering the level of turnover, assets or employees of the group or the individual companies within the group.
The size criteria has been increased from 6 April 2008 and the following table shows the revised limits:
|
|
Existing Thresholds |
No change |
New Thresholds |
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|
|
Turnover (not more than) |
Balance sheet total (not more than) |
Number of employees (not more than) |
Turnover (not more than) |
Balance sheet total (not more than) |
Small company |
£5.6 million |
£2.8 million |
50 |
£6.5 million |
£3.26 million |
Small Group |
£5.6 million net (or £6.72 million gross) |
£2.8 million net (or £3.36 million gross) |
50 |
£6.5 million net (or £7.8 million gross) |
£3.26 million net (or £3.9 million gross) |
Medium-sized company |
£22.8 million |
£11.4 million |
250 |
£25.9 million |
£12.9 million |
Medium-sized Group |
£22.8 million net (or £27.36 million gross) |
£11.4 million net (or £13.68 million gross) |
250 |
£25.9million net (or £31.1million gross) |
£ 12.9 million net (or £15.5 million gross) |
A company (or group) qualifies as a small or medium-sized company (or group) if it meets two out of three criteria relating to turnover, balance sheet total and number of employees as set out above in its first financial year, or in the case of a subsequent year, in that year and the preceding year.
It can be complicated to determine whether a group meets the criteria of medium sized and I suggest that you seek professional advice if you are unsure.
The implications for the abolition of the medium sized exemption are vast. Not only will it mean more time and cost in preparing and producing the group accounts but there will be additional information disclosed at Companies House, such as turnover which means that competitors and other third parties can determine your gross margin whereas previously they were unable to do this.
A thorough review of the history of the group will need to be undertaken and where subsidiaries were acquired it will be necessary to assess the fair values of the assets acquired to ascertain whether there was any goodwill paid on acquisition. The group will also need to consider the accounting policy for the amortisation of the goodwill.
There are other implications, too many to mention here but the message is if you think your business will be affected by the above speak to a professional advisor. Simple things like considering extending your year end may postpone the above changes.
For further information please contact Martin Herron at MacIntyre Hudson LLP www.macintyrehudson.co.uk on 01604 624011 or Martin.Herron@mhllp.co.uk
