UK Audit Exemptions: Some useful information about the audit exemptions for private limited companies and subsidiary companies in the UK
An audit of the annual accounts of your private limited business may not be necessary as per the UK audit exemptions. If your articles of association require it, or your shareholders request one, you will need an audit.
Financial years beginning after January 1, 2016
If your company has at least two of these:
- A turnover per year of not more than PS10.2 millions
- Assets not worth more than PS5.1 Million
- On average, 50 employees or less
Financial years starting between 1 October 2012 & 31 December 2015.
If your company has at least two of these:
- A maximum annual turnover of PS6.5 million
- Assets not worth more than PS3.26 Million
- On average, 50 employees or less
Financial years that began before October 2012
If your company has either of these, it may be eligible for a UK audit exemption:
- A maximum annual turnover of PS6.5 million
- Assets not worth more than PS3.26 Million
The main requirements for the UK Audit exemptions.
If you are using one of the UK audit exemptions, the following statement must be included.
The company was exempted from audit for the year ending (your company’s end date) under section 477 of the 2006 Companies Act relating to small businesses. The members have not requested that the company obtain an audit of its accounts for this year, in accordance with section 476. Directors acknowledge that they are responsible for adhering to the Act’s requirements regarding accounting records and preparation of accounts, and these accounts were prepared in accordance with the provisions applicable to small companies.
SHAREHOLDERS MAY REQUEST AN AUDIT
Even though your company is allowed for any one of the UK audit exemptions, shareholders who hold at least 10% of the shares (by value or number) must have their accounts audited. You can ask for an individual shareholder or a group of investors.
They must request the information in writing and send it to the registered office of the company. The request must be received at least one month prior to the close of the financial year for which the UK audit exemptions are requested.
What are the UK Audit exemptions for subsidiary companies?
If one or more of these apply, a parent company or subsidiary company is eligible for audit exemption
- It is a dormant affiliate and it is not exempt from the audit exemption for dormant businesses
- It is eligible for the exemption from audit of subsidiaries
- If all of the incorporated bodies, which includes non-UK incorporated entities, were companies, then the group would be considered a small group.
If both of these apply, a group is eligible.
- Except for being a public company, pensions, or labor relations body, any member of the group is exempt from audit exemption as described above.
- None of the members of the group issue securities that can be traded on a UK-regulated market (or, up to 31/12 2020, that are traded in an EU or UK-regulated market).
How do I claim an audit exemption in the United Kindgom?
A subsidiary can claim exemption from audit in certain situations if it is established under any law in the UK.
Companies House will need your delivery of:
- Written notice that all the members of the subsidiary company have agreed to the exemption for the relevant financial year
- Correctly completed form AA06 – Statement from the parent undertaking guaranteeing the subsidiary in accordance with section 479C of 2006 Companies Act.
- A copy of the parent company’s consolidated accounts, including the auditor’s report as well as the annual report.
These documents must be delivered to Companies House prior to the due date of your accounts.
The parent undertaking must include the subsidiary in its consolidated accounts for that financial year or an earlier date within the same financial year. In the notes to their consolidated accounts, the parent undertaking must declare that the subsidiary is exempted from the requirements of the Act in relation to the auditing of accounts under section 479A (Companies Act 2006).
The agreement and parent’s consolidated accounts should clearly show the name and registered number of the subsidiary company on the document.
If your financial year ends after October 1, 2012, this exemption will not apply to subsidiary companies
Which companies are not allowed for the UK audit exemptions?
If your company has been involved in any of the following during the financial year, you must have an audit and you are not eligible for audit exemptions.
- A public company, unless it’s not dormant. See the company accounts guidance for dormant accounts.
- A subsidiary company (unless it qualifies to an exemption – see the section on subsidiary companies in the company accounts guidance).
- A licensed insurance company
- Executing insurance market activities
- Banking involvement
- An issuer of electronic currency (e-money).
- An investment firm that follows the Markets in Financial Instruments Directive.
- The management company for Undertakings for Collective Investment in Transferable Securities
- An entity corporate and its shares are traded on a regulated exchange
- Funder for a master trust pensions plan
- A special registered body
- A labour relations or pensions body
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