[ Exemptions from audit for certain categories of small company]U.K.
249A Exemptions from auditE+W
(1)Subject to section 249B, a company which meets the total exemption conditions set out below in respect of a financial year is exempt from the provisions of this Part relating to the audit of accounts in respect of that year.
(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)The total exemption conditions are met by a company in respect of a financial year if—
(a)it qualifies as a small company in relation to that year for the purposes of section 246,
(b)its turnover in that year is not more than [£5.6 million], and
(c)its balance sheet total for that year is not more than [£2.8 million].
(3A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6)For a period which is a company’s financial year but not in fact a year the maximum [figure for turnover] shall be proportionately adjusted.
[(6A)A company is entitled to the exemption conferred by subsection (1) . . . notwithstanding that it falls within paragraph (a) or (b) of [section 249AA(1)].]
(7)In this section—
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249A Exemptions from auditS
(1)Subject to section 249B, a company which meets the total exemption conditions set out below in respect of a financial year is exempt from the provisions of this Part relating to the audit of accounts in respect of that year.
(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)The total exemption conditions are met by a company in respect of a financial year if—
(a)it qualifies as a small company in relation to that year for the purposes of section 246,
(b)its turnover in that year is not more than [£5.6 million], and
(c)its balance sheet total for that year is not more than [£2.8 million].
(3A). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6)For a period which is a company’s financial year but not in fact a year the maximum [figure for turnover] shall be proportionately adjusted.
[(6A)A company is entitled to the exemption conferred by subsection (1) . . . notwithstanding that it falls within paragraph (a) or (b) of [section 249AA(1)].]
(7)In this section—
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[249AA Dormant companiesE+W+S
(1)Subject to section 249B(2) to (5), a company is exempt from the provisions of this Part relating to the audit of accounts in respect of a financial year if—
(a)it has been dormant since its formation, or
(b)it has been dormant since the end of the previous financial year and subsection (2) applies.
(2)This subsection applies if the company—
(a)is entitled in respect of its individual accounts for the financial year in question to prepare accounts in accordance with section 246, or would be so entitled but for the application [to it of subsection (1A), (1B)(a) or (1C)(a) of section 247A] , and
(b)is not required to prepare group accounts for that year.
(3)Subsection (1) does not apply if at any time in the financial year in question the company was—
[[(a)an authorised insurance company, a banking company, an e-money issuer, [a MiFID investment firm] or a UCITS management company;]
(b)a person who carries on insurance market activity]
(4)A company is “dormant” during any period in which it has no significant accounting transaction.
(5) “Significant accounting transaction” means a transaction which—
(a)is required by section 221 to be entered in the company’s accounting records; but
(b)is not a transaction to which subsection (6) or (7) applies.
(6)This subsection applies to a transaction arising from the taking of shares in the company by a subscriber to the memorandum as a result of an undertaking of his in the memorandum.
(7)This subsection applies to a transaction consisting of the payment of—
(a)a fee to the registrar on a change of name under section 28 (change of name),
(b)a fee to the registrar on the re-registration of a company under Part II (re-registration as a means of altering a company’s status),
(c)a penalty under section 242A (penalty for failure to deliver accounts), or
(d)a fee to the registrar for the registration of an annual return under Chapter III of Part XI.]
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249B Cases where exemptions not availableE+W
(1)[Subject to [subsections (1A) to (1C)],] a company is not entitled to the exemption conferred by subsection (1) . . . of section 249A in respect of a financial year if at any time within that year—
(a)it was a public company,
[(b)it was an authorised insurance company, a banking company, an e-money issuer, [a MiFID investment firm] or a UCITS management company,]
[(bb)it carried on an insurance market activity,]
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e)it was a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 or an employers’ association as defined in section 122 of that Act, or
(f)it was a parent company or a subsidiary undertaking.
[(1A)A company which, apart from this subsection, would fall within subsection (1)(f) by virtue of its being a subsidiary undertaking for any period within a financial year shall not be treated as so falling if it is dormant (within the meaning of [section 249AA]) throughout that period.]
[(1B)A company which, apart from this subsection, would fall within subsection (1)(f) by virtue of its being a parent company or a subsidiary undertaking for any period within a financial year, shall not be treated as so falling if throughout that period it was a member of a group meeting the conditions set out in subsection (1C).
(1C)The conditions referred to in subsection (1B) are—
(a)that the group qualifies as a small group, in relation to the financial year within which the period falls, for the purposes of section 249 [(or if all bodies corporate in such group were companies, would so qualify)] and is not, and was not at any time within that year, an ineligible group within the meaning of section 248(2),
(b)that the group’s aggregate turnover in that year (calculated in accordance with section 249) is [, . . . , [not more than £5.6 million net (or £6.72 million gross)]], and
(c)that the group’s aggregate balance sheet total for that year (calculated in accordance with section 249) is [not more than £2.8 million net (or £3.36 million gross)] ).]
(2)Any member or members holding not less in the aggregate than 10 per cent in nominal value of the company’s issued share capital or any class of it or, if the company does not have a share capital, not less than 10 per cent in number of the members of the company, may, by notice in writing deposited at the registered office of the company during a financial year but not later than one month before the end of that year, require the company to obtain an audit of its accounts for that year.
(3)Where a notice has been deposited under subsection (2), the company is not entitled to the exemption conferred by subsection (1) . . . of section 249A [or by subsection (1) of section 249AA] in respect of the financial year to which the notice relates.
(4)A company is not entitled to the exemption conferred by subsection (1) . . . of section 249A [or by subsection (1) of section 249AA] unless its balance sheet contains a statement by the directors—
(a)[ to the effect]that for the year in question the company was entitled to exemption under subsection (1) . . . . . . of section 249A [or subsection (1) of section 249AA],
[(b)to the effect that members have not required the company to obtain an audit of its accounts for the year in question in accordance with subsection (2) of this section]
(c)[ to the effect]that the directors acknowledge their responsibilities for—
(i)ensuring that the company keeps accounting records which comply with section 221, and
(ii)preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year and of its profit or loss for the financial year in accordance with the requirements of section 226, and which otherwise comply with the requirements of this Act relating to accounts, so far as applicable to the company.
(5)The statement required by subsection (4) shall appear in the balance sheet [above the signature required by section 233] required by section 233 or, as the case may be, above any statement required by section 246(1A) or by paragraph 23 of Schedule 8.
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Textual Amendments
249B Cases where exemptions not availableE+W
(1)[Subject to [subsections (1A) to (1C)],] a company is not entitled to the exemption conferred by subsection (1) or (2) of section 249A in respect of a financial year if at any time within that year—
(a)it was a public company,
[(b)it was an authorised insurance company, a banking company, an e-money issuer, [a MiFID investment firm] or a UCITS management company,]
[(bb)it carried on an insurance market activity,]
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e)it was a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 or an employers’ association as defined in section 122 of that Act, or
(f)it was a parent company or a subsidiary undertaking.
[(1A)A company which, apart from this subsection, would fall within subsection (1)(f) by virtue of its being a subsidiary undertaking for any period within a financial year shall not be treated as so falling if it is dormant (within the meaning of [section 249AA]) throughout that period.]
[(1B)A company which, apart from this subsection, would fall within subsection (1)(f) by virtue of its being a parent company or a subsidiary undertaking for any period within a financial year, shall not be treated as so falling if throughout that period it was a member of a group meeting the conditions set out in subsection (1C).
(1C)The conditions referred to in subsection (1B) are—
(a)that the group qualifies as a small group, in relation to the financial year within which the period falls, for the purposes of section 249 [(or if all bodies corporate in such group were companies, would so qualify)] and is not, and was not at any time within that year, an ineligible group within the meaning of section 248(2),
(b)that the group’s aggregate turnover in that year (calculated in accordance with section 249) is [, where the company referred to in subsection (1B) is a charity, not more than [£700,000 net (or £840,000 gross)][or, where the company so referred to is not a charity] , [not more than £5.6 million net (or £6.72 million gross)]], and
(c)that the group’s aggregate balance sheet total for that year (calculated in accordance with section 249) is [not more than £2.8 million net (or £3.36 million gross)] ).]
(2)Any member or members holding not less in the aggregate than 10 per cent in nominal value of the company’s issued share capital or any class of it or, if the company does not have a share capital, not less than 10 per cent in number of the members of the company, may, by notice in writing deposited at the registered office of the company during a financial year but not later than one month before the end of that year, require the company to obtain an audit of its accounts for that year.
(3)Where a notice has been deposited under subsection (2), the company is not entitled to the exemption conferred by subsection (1) or (2) of section 249A [or by subsection (1) of section 249AA] in respect of the financial year to which the notice relates.
(4)A company is not entitled to the exemption conferred by subsection (1) or (2) of section 249A [or by subsection (1) of section 249AA] unless its balance sheet contains a statement by the directors—
(a)[ to the effect]that for the year in question the company was entitled to exemption under subsection (1) or (2) . . . of section 249A [or subsection (1) of section 249AA],
[(b)to the effect that members have not required the company to obtain an audit of its accounts for the year in question in accordance with subsection (2) of this section]
(c)[ to the effect]that the directors acknowledge their responsibilities for—
(i)ensuring that the company keeps accounting records which comply with section 221, and
(ii)preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year and of its profit or loss for the financial year in accordance with the requirements of section 226, and which otherwise comply with the requirements of this Act relating to accounts, so far as applicable to the company.
(5)The statement required by subsection (4) shall appear in the balance sheet [above the signature required by section 233] required by section 233 or, as the case may be, above any statement required by section 246(1A) or by paragraph 23 of Schedule 8.
Extent Information
Textual Amendments
249B Cases where exemptions not availableS
(1)[Subject to [subsections (1A) to (1C)],] a company is not entitled to the exemption conferred by subsection (1) . . . of section 249A in respect of a financial year if at any time within that year—
(a)it was a public company,
[(b)it was an authorised insurance company, a banking company, an e-money issuer, [a MiFID investment firm] or a UCITS management company,]
[(bb)it carried on an insurance market activity,]
(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(e)it was a special register body as defined in section 117(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 or an employers’ association as defined in section 122 of that Act, or
(f)it was a parent company or a subsidiary undertaking.
[(1A)A company which, apart from this subsection, would fall within subsection (1)(f) by virtue of its being a subsidiary undertaking for any period within a financial year shall not be treated as so falling if it is dormant (within the meaning of [section 249AA]) throughout that period.]
[(1B)A company which, apart from this subsection, would fall within subsection (1)(f) by virtue of its being a parent company or a subsidiary undertaking for any period within a financial year, shall not be treated as so falling if throughout that period it was a member of a group meeting the conditions set out in subsection (1C).
(1C)The conditions referred to in subsection (1B) are—
(a)that the group qualifies as a small group, in relation to the financial year within which the period falls, for the purposes of section 249 [(or if all bodies corporate in such group were companies, would so qualify)] and is not, and was not at any time within that year, an ineligible group within the meaning of section 248(2),
(b)that the group’s aggregate turnover in that year (calculated in accordance with section 249) is [, . . . , [not more than £5.6 million net (or £6.72 million gross)]], and
(c)that the group’s aggregate balance sheet total for that year (calculated in accordance with section 249) is [not more than £2.8 million net (or £3.36 million gross)] ).]
(2)Any member or members holding not less in the aggregate than 10 per cent in nominal value of the company’s issued share capital or any class of it or, if the company does not have a share capital, not less than 10 per cent in number of the members of the company, may, by notice in writing deposited at the registered office of the company during a financial year but not later than one month before the end of that year, require the company to obtain an audit of its accounts for that year.
(3)Where a notice has been deposited under subsection (2), the company is not entitled to the exemption conferred by subsection (1) . . . of section 249A [or by subsection (1) of section 249AA] in respect of the financial year to which the notice relates.
(4)A company is not entitled to the exemption conferred by subsection (1) . . . of section 249A [or by subsection (1) of section 249AA] unless its balance sheet contains a statement by the directors—
(a)[ to the effect]that for the year in question the company was entitled to exemption under subsection (1) . . . . . . of section 249A [or subsection (1) of section 249AA],
[(b)to the effect that members have not required the company to obtain an audit of its accounts for the year in question in accordance with subsection (2) of this section]
(c)[ to the effect]that the directors acknowledge their responsibilities for—
(i)ensuring that the company keeps accounting records which comply with section 221, and
(ii)preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year and of its profit or loss for the financial year in accordance with the requirements of section 226, and which otherwise comply with the requirements of this Act relating to accounts, so far as applicable to the company.
(5)The statement required by subsection (4) shall appear in the balance sheet [above the signature required by section 233] required by section 233 or, as the case may be, above any statement required by section 246(1A) or by paragraph 23 of Schedule 8.
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249C The report required for the purposes of section 249A(2).E+W+S
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249D The reporting accountantU.K.
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249E Effect of exemptionsE+W+S
(1)Where the directors of a company have taken advantage of the exemption conferred by section 249A(1) [or 249AA(1)]—
(a)sections 238 and 239 (right to receive or demand copies of accounts and reports) shall have effect with the omission of references to the auditors’ report;
(b)no copy of an auditors’ report need be delivered to the registrar or laid before the company in general meeting;
(c)subsections (3) to (5) of section 271 (accounts by reference to which distribution to be justified) shall not apply.
[(1A)Where the directors of a company have taken advantage of the exemption conferred by section 249AA, then for the purposes of that section the company shall be treated as a company entitled to prepare accounts in accordance with section 246 even though it is a member of an ineligible group.]
(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .