Audit Exemption and Thresholds

A company can be exempt from having an audit if they fall in one of the four categories:

1.       Dormant company

A company that is not doing any business(trading) and doesnt have any other income for example investments.

2.       Small and stand-alone company

A company is deemed small if it meets two out of the three thresholds in both the current and previous year. The thresholds are as follows:

The thresholds also apply to the first financial year and if a company was previously audited, it takes two consecutive financial years of meeting the above conditions for a company to be exempt from an audit.

3.       Small member of a group

A company that is a member of a group must meet the above-mentioned criteria to be deemed small and the group must meet two of the three requirements to be classified as small, using either net (consolidated accounts) or gross (adding individual accounts for the group companies without adjusting for intragroup transactions/balances) threshold:

The thresholds also apply to the first fiscal year, and if the group has already undergone an audit, it takes two fiscal years of meeting the aforementioned requirements in a row for them to be exempt.

4.       Any size subsidiary of a UK parent with a parent guarantee

Exemption from audits can be granted by way of parent guarantee for any subsidiary company whose parent is established in the United Kingdom under s479A of the Companies Act 2006.

The parent guarantee does not have to come from the immediate parent.

The consolidated accounts drawn up by the parent undertaking must include the subsidiary company and should disclose that the parent company indefinitely guarantees the liabilities of its subsidiaries that exist at year-end and file a form with companies house.

Ineligible group

A group cannot qualify as small and will be ineligible for an audit exemption if any of its members is:

• A traded company;
• A body corporate whose shares are admitted to trading on a regulated market;
• An e-money issuer; or
• A small company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm