Small and medium-sized company exemptions

What exemptions are available?

Certain small or medium-sized companies may prepare accounts for their members under the special provisions of sections 246 and 246A of the Companies Act 1985. In addition, they may prepare and deliver abbreviated accounts to the Registrar.


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. Similarly, companies which are part of a group which has members who are public companies or certain companies in the regulated sector cannot qualify as small or medium-sized.

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 £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.
The above accounting exemption thresholds apply to financial years ending on or after 30 January 2004. For earlier financial years, to be a small company, at least 2 of the following conditions must be met:
  • annual turnover must be £2.8 million or less;
  • the balance sheet total must be £1.4 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 £22.8 million or less;
  • the balance sheet total must be £11.4 or less;
  • the average number of employees must be 250 or fewer.

The above accounting exemption thresholds apply to financial years ending on or after 30 January 2004. For earlier financial years, to be a medium-sized company, at least 2 of the following conditions must be met:annual turnover must be £11.2 million or less; the balance sheet total must be £5.6 million or less; the average number of employees must be 250 or fewer

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.The exemption will continue uninterrupted if the company reverts to being small or medium-sized the following year - see the table below.