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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3825
Experience:  FCCA FCMA CGMA ACIS
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We are a small business, who will break achieve revenue above

Customer Question

We are a small business, who will break achieve revenue above 6.4m and employee in excess of 50 staff in this current year. As I understand we will be classed as a medium sized company and we will have to be audited and submit more information to companies house, which will be visable for all to see.
Can you advise:
1. Is the above statment correct?
2. Can we delay having to qualify for the medium status for 1 year in case out turnover.employee numbers reduce the following year?
3. If Not, what other options do we have to avoide having to publish more detials on our P & L and profit?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question. Your surmise would appear to be correct; your company seems to have breached the small company limits and would thus be classed as a medium sized company. Solution, split the business into two companies to avoid the position. Simple, as the mercaat in the TV advert would say.
Grant Thornton give the following definition of a company pursuant to the Companies Act, 2006:
'- Number of employees - not more than 50
- Turnover - not more than £6.5 million
net (or £7.8 million gross)
- Balance sheet total - not more than
£3.26 million net (or £3.9 million gross)
A small company will not normally require
an audit, as long as none of these limits are
exceeded.'
A medium sized company can choose to disclose less information in its financial
statements than large companies.
Form another company and split the business would be my solution. I do hope I have helped shed some light on your situation.
Customer: replied 2 years ago.

Hi Keith,

Thanks for the prompt reply.

So is my interpretation of the statement made on companies house incorrect, that after multiple years of being classified as a small company, that in the first year of being classified as a medium company you can still claim the small company exemption?

Only then if we were to be classified as a medium company for a second year would we then need to publish the further information requested?

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/418559/GP2_Life_of_a_Company_Part_1_v4_4-ver0.3.pdf

Page 28:

4. Can a company qualify as a small company every year?

Generally, a company qualifies as small in its first accounting period if it fulfils the conditions in that period. In any subsequent periods a company must fulfil the conditions in that period and the period before. However, if a company which qualified as small in one period no longer meets the criteria in the next period, it may continue to claim the exemptions available for the next period. If that company then reverts back to being small by meeting the criteria for the following period, the exemption will continue uninterrupted

I look forward to your response.

Expert:  bigduckontax replied 2 years ago.
You do have the one year latitude; according to the Gov UK web site:
'However, if a company which qualified as small in one period no longer meets the criteria in the next period, it may continue to claim the exemptions available for the next period. If that company then reverts back to being small by meeting the criteria for the following period, the exemption will continue uninterrupted.'
However, if these small company limitations are likely to continue to be breached or business expands then my advice to split into two companies holds. Your turnover and staff numbers are perilously close to the small company limits.
Customer: replied 2 years ago.

Hi Keith,

Thanks for the reply, obviously the statement you posted I have already noted and I am seeking clarification of my interpretation, not looking for an alternate way of not needing to comply with the companies house requirements of a medium sized company, e.g. splitting the company into two.

I am looking to 100% verify that in the first year of meeting the criteria of a medium company, after being classified as a small company for a number of years, that we can claim small company exemption in this first year?

I understand and accept that if we were to be classified as a medium sized company for a second year, that we would then need to disclose the financial requirements of a medium sized company to companies house.

I look forward to your response.

Expert:  bigduckontax replied 2 years ago.
You are correct in your understanding, you have it to a T. For the first year you cease to be small and become medium you can still benefit from the small company status, but thereafter, if the small company limits continue to be breached, it will be classified a medium with all the palaver that status entails.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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