Explanatory Note
(This note does not form part of the Regulations)
1. These Regulations amend provisions in Part VII of the Companies Act 1985 (c. 6) (“the 1985 Act”) concerning the exemption of certain small companies from the requirement to have their annual accounts audited. The amendments are to apply to annual accounts for financial years ending two months or more after the coming into force of the Regulations (regulation 1(2)).
2. Regulation 2(3) increases the turnover limit in section 249A(3)(b) of the 1985 Act which a small company other than a small charitable company must not exceed in respect of a financial year if it is to be exempt from audit from £90,000 to £350,000 (for small charitable companies the gross income limit will remain at £90,000—see regulation 2(4)). As a consequence of this increase, the requirement that small companies falling within section 249A(2) obtain a report from a reporting accountant is repealed except in the case of small charitable companies.
3. Regulation 2(7) inserts a new subsection (6A) into section 249A of the 1985 Act to make clear that companies which are dormant and which fall within paragraph (a) or (b) of section 250(1) of the 1985 Act may claim exemption from audit under either section 249A or section 250. Regulation 2(8) provides that that amendment shall be deemed to have had effect since the commencement of section 249A (on 11th August 1994).
4. Regulation 3(2) and (3) amends section 249B of the 1985 Act. The amendments enable a company which would otherwise be disqualified from claiming exemption from audit under section 249A for a financial year because it was a parent company or subsidiary undertaking for any period in that year, to claim the exemption, provided that the group of which it was a member was a small group satisfying the conditions specified in new section 249B(1C).
5. Regulation 4 amends section 249D(3)(d) of the 1985 Act as a consequence of the Chartered Association of Certified Accountants having changed its name to the Association of Chartered Certified Accountants.