Don’t Judge a Book by Its Cover
In the wondrous world of UK law, you might think a ‘small company’ has something to do with height. Maybe it’s a business where all the employees are under 5 feet tall? Sorry to burst your imaginative bubble, but a ‘small company’ has nothing to do with physical stature. So, let’s dive into what really makes a small company tick—without any height restrictions!
Size Does Matter (But Not in the Way You Think)
To determine if your company qualifies as ‘small,’ it needs to meet at least two of the following three criteria for the current and preceding financial year:
- Net Worth: Does not exceed £5.1 million. So, if your company’s finances look more like a coffee shop’s tips jar than Apple’s tax returns, you might be in luck!
- Turnover: Does not exceed £10.2 million. A turnover bigger than your grandpa’s holiday turkey? Time to say goodbye to ‘small company’ perks!
- Average Number of Employees: Does not exceed 50. Fewer than 50 employees means more Christmas bonuses, right? That’s the dream!
For accounting periods beginning on or after 1 January 2016, a company in its first financial year, fresh out of the registration oven, can qualify as a small company if it stays within these limits. And if your company has already donned the small company wig for the past two financial years, it might continue to qualify.
The Perks of Being Tiny
Why should you bother fitting your company into this tiny shoe-sized category? For starters, certain small companies can prepare abridged accounts for their members and the Registrar of Companies. Less paperwork is always a win, right?
Additionally, many small companies can claim total exemption from a statutory audit. That means one less suit-wearing auditor poking around in your books. 🎉 However, if your company is part of a group under the influence of big shots like public companies, banks, or insured companies, sorry, no small company perks for you.
Charts and Graphs Because Why Not?
Here’s an exciting flowchart to help you visualize this rocket science:
graph TD
A[Company] -->|Meet 2 out of 3 criteria| B((Small Company))
B --> C[Benefits: Abridged Accounts & Audit Exemption]
A -->|Part of Public/Bank/Insurance Group| D{Nope!}
C -->|Yay!| E[Financial Peace of Mind]
D -->|Try Again| E[Financial Peace of Mind]
No Pressure, Just Measure
Being classified as a ‘small company’ is like having a VIP backstage pass to financial perks! But remember, size does matter, just in terms of net worth, turnover, and employees, not your personal height. Until next time, stay tall, stay strong, and keep those financials small (but not too small)!
Quizzes
Show off your knowledge with these quizzes!
