New Benefits for Small Companies

Most companies with turnover below £1m are currently exempt from the requirement to have a statutory audit. The number of companies eligible to take advantage of this exemption is set to grow following a government announcement that the £1m threshold has been increased to £5.6m. The new threshold is effective for financial years ending on or after 30 March 2004.

The increase in this exemption threshold has also been linked to changes in the definition of both small and medium-sized companies. Details of the new and old qualification limits are shown in the tables below. The new limits are effective for financial years ending on or after 30 January 2004.

	Old small company limits	New small company limits
Turnover not more than	£2.8m	£5.6m
Balance sheet total not more than	£1.4m	£2.8m
Number of employees not more than	50	50

	Old medium-sized company limits	New medium-sized company limits
Turnover not more than	£11.2m	£22.8m
Balance sheet total not more than	£5.6m	£11.4m
Number of employees not more than	250	250

Good news

The increased small and medium-sized company limits could mean that your business may be able to take advantage of increased capital allowances such as:

100% first year allowances for expenditure on computer equipment (small only).
40% first year allowances for expenditure on plant and machinery generally (small and medium- sized).

Companies now qualifying as small will also be able to use simplified accounting standards and will be able to file less detailed accounts at Companies House.

The increased limits also mean that we will be able to offer a more flexible service and you can now decide whether or not you would like to continue having an audit. There are of course costs involved in the audit process and correspondingly there are savings to be made. Before you make your decision please do come and talk to us - not all companies are eligible for audit exemption and indeed some Regulatory Bodies require audited accounts. There are also a number of benefits associated with the audit process to consider:

Assurance. An audit increases confidence in the reported figures. This may be of particular benefit for external shareholders.
Credibility. Adding an audit report to a set of accounts increases their credibility, which can help greatly when dealing with external organisations such as banks and other lenders. Some lenders may require an audit as a condition of a loan.
Advice. Time spent auditing enables us to understand your business and as a result provide quality advice in many other areas.
Fraud. Fraud continues to be an ever-present part of business life. Whilst an audit cannot guarantee to detect all fraud it is an important tool in helping its prevention by acting as a deterrent to a potential fraudster.
Taxation. Tax law never seems to become any simpler! Without an audit accountants would need to spend time ensuring that you and your company conduct your affairs in the most tax efficient manner.