Definition
Audit exemption allows a qualifying small company, including a micro-entity, to file annual accounts that an independent auditor has not checked. The directors claim it with a statement on the balance sheet under section 477 of the Companies Act 2006, or section 480 for dormant companies. The directors remain responsible for the accounts and the company’s accounting records.
Who qualifies
For financial years starting on or after 6 April 2025, a company can usually claim the small company exemption if it meets two of three limits: turnover of £15 million or less, a balance sheet total of £7.5 million or less, and 50 or fewer employees on average. Some companies must always be audited, such as banks, insurers and e-money issuers, and a company’s articles can also require an audit.
When shareholders can insist
Shareholders holding at least 10% of the shares can require an audit. They must write to the registered office at least one month before the end of the financial year concerned.
The exemption statement
The balance sheet must say the company was entitled to exemption under section 477, the members have not required an audit under section 476, and the directors acknowledge their responsibilities for accounting records and preparing accounts. From 1 April 2028 an enhanced statement will be needed, naming the exemption and confirming the company qualifies. You can see what a micro-entity files, including where the statement sits.
Related questions
- What do micro-entity accounts include? A balance sheet with the directors' statements, a simple profit and loss account and a few notes.
- Does a dormant company need an audit? Usually not, as it can claim the section 480 exemption.
Related terms
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Annual accounts
Annual accounts, also called statutory accounts, are the financial statements a UK limited company prepares at the end of each financial year.
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Micro-entity accounts
Micro-entity accounts are the simplified annual accounts that a company qualifying as a micro-entity can prepare under the accounting standard FRS 105.
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Small company accounts
Small company accounts are annual accounts prepared under the small companies regime, normally using the accounting standard FRS 102 Section 1A.
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Total exemption full accounts
"Total exemption full" is the label Companies House shows in a company's filing history when a small company has filed full accounts…
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