Micro Entities Accounts

Micro Entities Accounts

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Who gets what with Micro Entities Accounts?

There are very few comments on AccWeb, and there are still some clear differences of opinion in the AccWeb posts and we are 15 months down the road.

Do shareholders and HMRC get "Full Statutory" (including some 4 pages of Notes) if so, why does the HMRC CT600 pdf accept ME accounts with an 'X' to the box for Micro-entity footnotes, then no further Notes?

And where in here ...

http://www.icaew.com/en/technical/financial-reporting/other-reporting-is...

does it say that shareholders and HMRC still get full statutory accounts, notes et al?

And what are the various software offerings doing?

So, for MEs, no Notes to anyone, except those referred to in the above link, particularly with regard to directors' transactions, right? wrong?

Replies (14)

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By petersaxton
04th Feb 2015 11:18

It's a fad

They'll come up with some other nonsense in a couple of years.

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By Ken Howard
04th Feb 2015 11:42

Simples

The "full" statutory accounts now just include a simplified directors report, P&L, and BS with notes at the foot of the BS as regards directors loans, commitments, liabilities and a statement of the exemptions claimed etc.  

VT does it simply and painlessly.  Similar to the sole trader and partnership formats but with the "proper" wording and the stat format for the P&L and BS.

Thank heavens we've got rid of all the nonsense forced upon us for the last few decades of having to analyse the B/s in a specific manner, declare payroll costs, declare interest, and having to state the bleeding obvious in the directors report.  

What a waste of time it has been all these years preparing 3 pages of notes and drafting a directors report for one man or family companies who know it all anyway!  

 

 

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By SJRUK
04th Feb 2015 12:01

Just Micro

I prepare the Micro accounts as per VT.

I file the Directors Report and BS with Companies House,

HMRC get the Directors Report, Accountants Report, P&L & BS - no notes (except if needed on BS) nor detailed P&L or detailed BS.

Clients gets as per HMRC plus 2 additional pages for detailed P&L and detailed BS

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By petersaxton
04th Feb 2015 12:21

one man and family companies

"What a waste of time it has been all these years preparing 3 pages of notes and drafting a directors report for one man or family companies who know it all anyway!"

Unless the law has a different category for one man companies then more information is needed.

It's not always the case that family company members know it all.

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By TerryD
04th Feb 2015 13:34

The thing to remember is that ME accounts ARE the full statutory accounts for companies that choose to go down that path. I'm just dreading somebody asking for an audit to be done on a set of ME accounts - the law says that they don't fail to show a true and fair view simply because of the almost total lack of disclosures that would otherwise be required. But I might find that hard to swallow.

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Replying to Lone_Wolf:
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By andyjdicker
05th Feb 2015 08:28

You can't

TerryD wrote:

The thing to remember is that ME accounts ARE the full statutory accounts for companies that choose to go down that path. I'm just dreading somebody asking for an audit to be done on a set of ME accounts - the law says that they don't fail to show a true and fair view simply because of the almost total lack of disclosures that would otherwise be required. But I might find that hard to swallow.

I'm pretty sure you can't.

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By adam.arca
04th Feb 2015 14:15

the rule of thumb...

...I've adopted is to only use the micro format where:

* only the one shareholder who is in reality a sole trader in all but name

* no large numbers (preferably turnover < £100k) and no staff, so truly micro

* no debt worth talking about and never overdrawn so shouldn't be any outside interest

I've only done a few this way and they've mostly been one man band, consultancy-type businesses where the traditional format is total overkill.

What I'm dreading, though, is the cute client who discovers that his business fits the real criteria rather than my more restrictive ones. Obviously, I would have to follow his instructions but can see it ending in tears / hassle when banks start getting their hands on these accounts (I even had to explain to a bank manager the other day that authorised share capital no longer exists for new companies).

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Teignmouth
By Paul Scholes
04th Feb 2015 17:30

Been doing them since the start

I only submitted two sets of Small Company accounts last year, the rest were Micros and it's such a relief not having to faff about with the notes and Related Party stuff for such small businesses.

As noted above, the main accounts go to shareholders and HMRC (I always include detailed P&L) and, in all of mine, Abridged accounts go to Companies House ie the balance sheet from the main accounts with a slightly different wording at the base.

All mine are done on Iris with the down side being that the balance sheet gives no information, so, unless they are a Cloud accounting client, where I've already discussed the detailed accounts with the client, I prep a detailed Balance Sheet on Iris that shows a complete breakdown, as an extra schedule.

Within the year, with the new FRSME, the directors report will drop out completely and there will be no need to provide for deferred tax.

I'd imagine that most Cloud accounting systems will have ME accounts prep out in the next year or two, and for such businesses, the year end accounts will be less involved than the VAT returns.

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By TerryD
04th Feb 2015 18:01

Just had a quick skim through the new Accounts Regulations (years beginning on or after 1 January 2016) as they affect small companies:

Goodbye abbreviated accounts!

Hello Abridged accounts (standard formats tailored as required), so long as all members agree.

Goodbye half of the notes

Goodbye directors' report for MEs

Hello maximum life of intangible assets, where no reliable estimate of useful life can be made, of 10 years (just to confuse the issue with FRS102 saying 5 years!!!)

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By petersaxton
04th Feb 2015 20:40

I don't agree

"Why would it end in tears?  If the bank want more, then they should instruct the client accordingly."

Because the bank will usually only ask after the accounts have been prepared. For me it wouldn't be a problem as I could run a set of accounts off quite easily but some accountants may have to do quite a lot of extra work.

"I'd be furious if I found out any service provider I engaged did more than necessary, and charged accordingly, without giving me a proper and honest evaluation of my options.  

It's like taking my car for servicing/MOT and being charged for new brake pads.  Then I find out that the brake pads were actually legal after all and still had a bit of life in them.  What I'd expect from a reputable garage is a phone call to explain the situation and offer me choices, rather than changing them anyway and leaving me a fait-accompli to pay for what they've unnecessarily done!"

I don't agree with your analogy. I wouldn't charge any different for either set of accounts so all I am doing is offer them something better which is the same price. I don't see the slightly greater disclosure as an issue.

Sometimes a client has not traded through their limited company for a full accounting year and they tell me they are wanting to close the company down. If I was unscrupulous I could advise them to have an extra years accounts prepare and I charge them and then they close the company. Instead, I tell them that I will tell HMRC that they haven't traded and I show them how to close their company without charging them. It's a thank you for using me as their accountant.

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By adam.arca
05th Feb 2015 08:06

Thank you, Peter
You've said what I was trying to say but obviously failing. Like you, I'm just trying to look out for the client and anticipate problems. As I'm sure Ken knows but isn't saying, what's good for the client jsn't always what they want (to mangle a much better saying).

To reply directly to Ken, though, I'm not literally "dreading" but was simply aping the terminology used by TerryD. Also, I'm not charging more for full accounts as I haven't reduced my prices for the micro ones. Why would prices reduces when the accountant is only saving half an hour typically and most likely isn't making a full recovery on that disclosure time anyway?

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By Philip Hoyle
05th Feb 2015 10:03

Echoes of audit exemption

This has echoes of small company statutory audit exemption a few years ago, where "the profession" was aghast that small companies wouldn't need a statutory audit anymore and there were the howls of protest that the banks, lenders and suppliers wouldn't like it and that there'd be dire consequences for companies that actually dare to not have an audit in the future.  Then, too, there were firms that continued to undertake full audits despite their clients being exempt with an attitude of "auditor knows best".   Of course, in reality, nothing happened.  

Today with the new micro entity exemptions, a few people will get a shock when they see the new reduced disclosures, but they'll get over it.  After I'd submitted a few CT600s to HMRC with the ME accounts attached, I got a rejection for one client, and I painstakingly and politely replied with copies of the ME guidelines, copy of the ICAEW factsheet re ME accounts, etc., and quickly received an apology from the tax inspector admitting that she didn't know things had changed, and that, of course, the ME accounts attached to the CT600 were acceptable after all!

Aren't there some more new rules about to come into force making reduced disclosure requirements mandatory for either micro or small companies, so that following the old more detailed format seemly beloved by many accountants will actually be prohibited?

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Replying to legerman:
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By adam.arca
05th Feb 2015 15:24

Echoes but also differences

Philip Hoyle wrote:

This has echoes of small company statutory audit exemption a few years ago, where "the profession" was aghast that small companies wouldn't need a statutory audit anymore

It does seem similar and, quite possibly, we'll all move smoothly over to the reduced format.

But there is a major difference as well. I still don't think many bank managers realise that the statutory audit went for small companies aeons ago and a lot of that is because the accounts still look the same. With micro accounts, they don't look anything like and, personally, I'm avoiding howls of protest from said managers by carrying on with the traditional format for any client who might remotely have any contact at all with his bank. Of course, because they don't look the same, the message might sink in quicker with the banks that the new format is kosher; in the meantime, however, I'll let somebody else's clients be the guinea pigs.

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Teignmouth
By Paul Scholes
05th Feb 2015 18:48

They are the client's accounts not ours

This is a mimic of a few threads that arose when M-E accounts were mooted 2-3 years back and I made exactly the same point as Philip above, the audit exemption in 93 was 10 times the earthquake this is, and the firm I was with moved from 40ish audits to 5 overnight.

But we had seen it coming and treated it as an opportunity not a threat, it meant we could spend or time doing work for the client that was more valuable than checking 50 purchase invoices, so we instigated VAT & PAYE Health checks and brought some clients into the world of quarterly management accounts rather than just annual accounts, it also meant we had more time on our hands to take on more clients.

I too remember firms who had decided to carry on auditing, without telling the client and, we took on some of these after they had discovered the con and dumped the firms.

This is obviously on a different scale but the same principle applies, if there's a change in legislation it's up to us to tell the client and let them decide.  Some may want to scare them with stories about banks not accepting M-E accounts (they said the same about HMRC two years ago) but if over 90% of Ltd Companies qualify as M-Es what are the banks going to do?  If they kick up a fuss send them a TB, lets face it the two to three pages of notes on FRSSE accounts told us nothing extra.

To all my clients it's been a (hate this) no brainer, and, as far as I'm concerned, the sooner the statutory accounts involve just a few mouse clicks the better.

 

 

 

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