Micro Entity Accounts - What are Micro Businesses?

A micro entity (or micro business) is a UK government classification given to “very small companies”. This is not an arbitrary classification; micro entities are treated differently what the government calls “small companies” in several important ways.

This guide will outline the key differences between a micro entity and a “small company”, including micro entity accounts requirements.

Micro entity vs "small company"

It is important to know whether your SME/Owner-managed Business is considered a small company or a micro entity by the government, as this classification will determine what you must include in your statutory (annual) accounts and what may be left out.

To be treated as a "small company" or micro entity, a company must meet two of the above criteria.

• For example, a business with £10.2 million turnover and fewer than 50 employees will be a small company, regardless of its balance sheet.
• Likewise, a business with a turnover of less than £632,000 and a balance sheet of less than £316,000 will be a micro entity, even if it employs more than 10 people.

What are micro entity accounts?

All private limited companies are required to file statutory (annual) accounts. These accounts record the company’s financial information from a specific accounting period. The statutory accounts must be sent to Companies House, HMRC, all shareholders (if applicable), and anyone who attends a company’s AGM (annual general meeting).

Micro entity accounts, like small companies, have slightly different rules from regular statutory accounts.

The differences between micro entity accounts and regular statutory accounts

If a company meets the criteria of a micro entity, their statutory accounts obligations are somewhat simpler, and are likely to require less time to prepare and file.

A micro entity:

1. is permitted to prepare and file abridged accounts containing less information than small company accounts, providing all company members agree to it, and;
2. is required to only send a balance sheet to Companies House, again with less information than small companies are required to share.

These are in addition to the following, which also apply to “small companies”:

3. They do not need to be audited
4. They can choose whether or not to send a director’s report and profit and loss (P&L) report to Companies House.

What are “abridged” accounts?

Not all companies need to disclose every financial detail publicly. Small companies and micro entities may file abridged accounts. These are condensed versions of the company's annual financial statements, offering a simpler picture than the full reports required from larger companies.

Abridged accounts typically mean:

• a simpler balance sheet showing overall movement in areas like assets or creditors, but not a detailed breakdown;
• limited public disclosure, and;
• elements like profit and loss accounts and a director’s report are optional.

Abridged accounts offer a way for smaller/micro companies to meet their legal reporting requirements while maintaining a degree of privacy regarding their financial specifics.

For a full list of guidelines for micro entities, as well as smaller and larger companies, we recommend consulting the official Companies House accounts guidance on gov.uk.