On 6 September 2012 the Government published its response to the Department for Business Innovation and Skills’ consultation paper “Audit exemptions and change of accounting framework” which detailed the Government’s decision to reform the rules on accounts and audit for companies and LLPs. As a result the Companies and Limited Liability Partnerships (Accounts and Audit Exemptions and Change of Accounting Framework) Regulations (the Regulations) were published on 11 September 2012 and came into force on 1 October 2012.
The Regulations create a number of new exemptions and widen certain existing exemptions in relation to the requirements for companies to prepare, file and audit annual accounts under Part 15 of the Companies Act 2006. Key changes include:
– provided a company or group qualifies as ‘small’ under section 382 of the Companies Act 2006, the separate turnover and balance sheet thresholds required to qualify for audit exemption will cease to apply;
– qualifying subsidiaries may be exempt from the audit requirement provided that, among other things, its parent undertaking guarantees the subsidiary’s liabilities outstanding at the end of the relevant financial year;
– dormant subsidiaries may be exempt from the obligation to prepare and file individual accounts for a financial year, again, provided its parent undertaking guarantees the subsidiary’s liabilities outstanding at the end of the relevant financial year;
– widening the circumstances in which a company or group producing accounts in accordance with international accounting standards may switch to produce accounts in accordance with the Companies Act 2006; and
– adding to the list of documents that the Registrar is required to publish, the documents that the directors of a subsidiary must file when seeking to use an exemption from the obligation to prepare, audit or file accounts.
The Regulations also amend the Limited Liability Partnership (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 to largely duplicate the effect of the changes made in relation to companies with minor variances to reflect the differences between the nature of companies and LLPs.