Blogger
Share this content
0
4
31122

HELP - When is a company considered part of a group for Companies House and Audit purposes?

Hi All,

Probably quite a simple question, but I obviously want to get it right.

When is a company considered part of a group, particularly for Companies House and Audit exemption purposes.

I know that the 'parent' must have control for Associated companies rules in Corporation Tax.

Would a company with 25% or 30% of the share capital be considered part of a group for Audit exemption purposes?

I hope you can help as soon as possible.

All the best.

David

Replies

Please login or register to join the discussion.

16th Mar 2011 13:09

Definition of group

A group is defined in s.474 CA 2006 as "a parent undertaking and its subsidiary undertakings", which in turn are defined in s.1162 CA 2006.

Basically, a company is a subsidiary if more than 50% of its voting shares are held by another (parent) company.

Thanks (0)
avatar
By johnt27
16th Mar 2011 13:18

Assuming share capital = control

Companies house aren't really bothered about groups (partly because they seemingly don't check the accounts that are being filed).

For Companies Act purposes a company will need to prepare group accounts by equity accounting for a subsidiary if the holding company controls 50% or more of the voting rights in the sub or for an associate company if the holding company controls 20% - 50% of voting rights. The methods for consolidating a sub with control are slightly different to an associate sub and the above are a guideline only as control can be inferred through other means regardless of share cap/voting rights held.

For audit purposes there are limits based on turnover and gross assets for individual companies and groups as follows:

Turnover - co £6.5m / group £6.5m (net) or £7.8m (gross)

Gross assets - co £3.26m / group £3.26m (net) or £3.9m (gross)

If any of the individual companies breaches one of the above company limits an audit is required. If the group as a whole, regardless of makeup (sub/associate), breaches either the net limits (i.e. with intercompany trade etc eliminated) or the gross limits the group will be required to have an audit. The gross and net limits are interchangeable between turnover and gross assets so you don't need to rely on no breaching the net limits or gross limits on both. So if you breach on net but not gross on turnover and vice versa on gross assets you don't need to audit the group.  If an audit is required the auditor will need to decide if each individual subsidiary company of the group is material to the group results. If it isn't material then the sub will not need to be audited.

Of course, if 10% or more of shareholders request an audit the above limits are irrelevant!

Thanks (0)
avatar
17th Mar 2011 12:42

What is the difference between a sub and associate sub

Hi,

 

Thank you very much for your very detailed guidelines.

 

I know that we breach the limits, because the other company/group is well above the audit limits, and if they require an audit, then as you say, we are obviously required to do so.

However, I am not sure about what the difference is between a sub and associate sub, because it seems key.

50% share capital required for subs, but 20-50% for associate subs?

 

Thank you again for your help, and any further help and guidance you could provide would be very gratefully received.

 

All the best.

David

Thanks (0)
avatar
By johnt27
17th Mar 2011 16:26

Control

The definition of a subsidiary is one that the holding company exercises control over, normally this means the holding company has 50% or more of voting rights (usually share cap, but watch out for pref shares, non voting shares or any other restrictions on votes).

An associate is one that the holding company exercises significant influence over, again as above but usually defined as between 20-50% of voting rights. The same caveats apply though!!

Thanks (0)