Many international businesses mistakenly assume their UK subsidiaries sit outside the Audit requirement, potentially risking high penalties. Some even risk criminal proceedings by not submitting the required paperwork against the deadlines.
Our guide from Shorts Partner Howard Freeman covers the essential details international businesses must know to be compliant with Audit requirements, and how to tell if your business is at risk.
Why must UK subsidiaries complete Audits?
In the UK, all companies above set thresholds are required to be audited. This responsibility applies to companies registered in the UK, including UK subsidiaries of international corporations.
An Audit helps preserve transparency and ensures compliance with legal and regulatory standards. It also helps improve shareholder and stakeholder confidence that the organisation is being run ethically and effectively.
Failure to comply with the UK’s audit regulations can mean legal and financial repercussions for the subsidiary and the parent company/owner.
Audit criteria for UK subsidiaries
UK subsidiaries of international corporations are treated in the same way as any other UK company where audit criteria and thresholds are concerned. A UK company must be audited depending on the following criteria:
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If 2 of 3 of these thresholds are not breached, the company will be classified as a small company and may not need an audit. However, some other factors must be considered if the UK company is a subsidiary.
Could a smaller UK subsidiary still need an audit?
A UK subsidiary that is classified as a small company (in relation to the criteria above) may still require an audit. This depends on a few factors relating to the parent or group company that the subsidiary belongs to. A UK subsidiary will require an audit if its total group activity exceeds any two of the following criteria:
- The group generates turnover equal to or greater than £10.2 million (after making consolidation adjustments) or £12.2 million (before removing intragroup balances or transactions).
- The group's total assets are equal to or greater than £5.1 million (net) or £6.1 million (gross).
- The average number of employees across the group for the period is 50 or above.
Even if a subsidiary and its group as a whole fall below all the thresholds listed above, there may still be factors that mean an audit is required.
Speak to our audit team about your UK subsidiary
The Shorts Audit team offers meaningful guidance and support to ensure your UK subsidiary complies with all requirements. As part of the Praxity Global Alliance, we can collaborate seamlessly with companies and leading independent business advisors with UK interests from all around the world.
Howard Freeman
Howard joined Shorts as a partner in 2003 and has a varied client base made up of private companies, partnerships and sole traders ranging from small businesses to large groups. Drawing on the experience gained through working for an international firm, Howard provides commercial business advice, providing accounting, audit and tax solutions for companies and businesses of all shapes and sizes. Howard is one of a handful of professionals in the area who is both a Chartered Accountant and Chartered Tax Adviser. He is often involved in advising on business acquisitions and disposals and heads our forensic accounting work.
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