On the 21st February 2012, the European Union defined a new category of company, the ‘micro-entity’. Micro-entities are very small limited liability companies and qualifying partnerships.
- Balance sheet total: £289,415 (€350,000)
- Net turnover: £578,830 (€700,000)
- Average number of employees during the financial year: 10 (or fewer)
- present “prepayments and accrued income” and “accruals and deferred income”
- recognise certain types of “prepayments and accrued income” and “accruals and deferred income”
- draw up notes to the accounts
- prepare an annual report
- publish annual accounts provided the financial data information contained in balance sheet items is filed with a designated competent authority.
The Government is seeking to make changes to the Companies Act 2006, and to the accounting regulations made under that Act and under EU law to implement the EU Directive 2012/6/EU of the European Parliament and of the Council (“the Micros Directive”). It would also make comparable changes to the accounting framework for Limited Liability Partnerships.
The ICAEW believes the lack of transparency and dearth of financial data would lead to more rejections of credit to these smaller organisations.
“We have a number of concerns about the suggested changes, as they may result in less transparency and less useful financial information. This, in turn, can over time have a negative impact on market confidence and on micro businesses’ ability to access finance, at least at the margins,” says Dr Nigel Sleigh-Johnson, head of the ICAEW’s Financial Reporting Faculty.