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Micro-Entity Accounts' Average Number of Employees

Companies House have finally added a note to their Template!

Didn't find your answer?

The Cos House note simply says "Average number of employees during the period" (for both current period and comparative columns), which means there's no apparent scope to qualify their note for eg "non-exec" or "contract-for-services" directors.

Anyone care to update the current-wisdom relating to that that old chestnut of a discussion, as to whether directors without a contract of service ought to be included in the count? I'm wary of excluding the two directors in the accounts I'm in the process of filing, in view of possible furlough pay repercussions. My choices are "2" or "0" employees, as the validation process won't let me by without my entering something.

It's remarkable, by the way, how Companies House have suddenly got their act together over this matter, given that stating the number of employees has been mandatory since (accounts commencing from) 1st January 2017. The last set of micro-entity accounts I filed at Cos House was a month ago on 29th April, and there were no "average number of employee" boxes then. Anyone sense a clawback of furlough pay might be the motivator behind this sudden burst of activity from the programmers, perhaps from those companies who record "zero" employees?

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By Tim Vane
26th May 2020 16:31

The definition of what to include is specified clearly in the Companies Act. Current Wisdom has nothing to do with it.

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By I'msorryIhaven'taclue
26th May 2020 16:48

Thanks Tim, the past A-web threads display two schools of thought regarding directors without a contract of service. Evidently there was/is some scope as to how the Act is interpreted, and I was unable to find a definitive consensus of opinion in the AWeb archives.

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RLI
By lionofludesch
26th May 2020 16:32

This has been asked before.

For the purposes of disclosure, directors count as employees, whether there's a contract or not.

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By I'msorryIhaven'taclue
26th May 2020 16:57

Thanks Lion, that's the argument I'd seen forwarded in the past - and rather convincing it is too - although those past threads do seem to contain a substantial number of objectors who conclude otherwise.

In any event I'm grateful to you for confirming that your current thinking hasn't changed, and that I haven't dozed off in May and missed something. Two directors it is!

I suppose this thread might serve as a warning to the "other camp" who have in the past argued for "zero" employees.

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By Wanderer
26th May 2020 17:00

Fairly sure, from memory, that Guy Loveday is in that 'other camp'.

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By lionofludesch
26th May 2020 17:03

Decent software won't allow you to enter zero.

Which, if I recall correctly, was the prompt which raised the query.

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By I'msorryIhaven'taclue
26th May 2020 17:19

lionofludesch wrote:

Decent software won't allow you to enter zero.

That's just the problem, the Companies House software is only too happy with a zero. I've just tested it.

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By lionofludesch
26th May 2020 17:23

Ach - do as you like.

Nobody checks this stuff anyway, least of all Companies House.

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By I'msorryIhaven'taclue
26th May 2020 17:56

Well I opted for 2 (but not before I'd tested to see whether it would accept a 0 - which indeed it will).

I wonder whether the Furlough-pay checking team at HMRC might take an interest in any company filing zero employees at Cos House. I vaguely recall some case law - I'm sure there may well have been many - in which a balance sheet approved by a director served as sufficient legal evidence of the existence of a loan (to the company from the director's mother; which in turn underpinned a reversible preferential creditor case). Might not a balance sheet approved by a director and lodged at Companies House provide similar evidence of no employees (and thereby bring the legitimacy of a past furlough claim into question)?

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By paulwakefield1
26th May 2020 18:46

From the latest VT Final accounts update: " ............... VT have been advised by Companies House that the average number of employees must be disclosed even when zero. "

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Red Leader
By Red Leader
26th May 2020 17:27

Given the very limited disclosure in micro entity a/cs, why was it considered necessary to mandate inclusion of this and so little else?

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By lionofludesch
26th May 2020 17:43

Baffling.

Possibly eligibility for micro-filing ? But, on the other hand, turnover's not disclosed.

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By Tim Vane
26th May 2020 20:01

Red Leader wrote:

Given the very limited disclosure in micro entity a/cs, why was it considered necessary to mandate inclusion of this and so little else?

Originally it wasn’t. And indeed it was omitted from the first release of FRS105. But then somebody realised that the CA legislation changes had omitted to remove the requirement (which must surely have been the original intention) and so back in it went.

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Red Leader
By Red Leader
27th May 2020 10:58

Farce. It almost makes you think that some of this legislation gets enacted without anyone checking it ...

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By Neil Douglas
27th May 2020 10:18

If you use software to file directly to CH they will still accept accounts without the average number of employees up until the 13th July, from that point any accounts without it will be rejected. Not sure to be honest why they are so late in the day in testing for something that has been compulsory for a couple of years now!

Neil Douglas
Eureka Software

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By Southbankdelboy
28th May 2020 15:38

Yes, baffling-again!
We have been over this many times as others have pointed out.
A director is an officer of the company I do not think that means they are an employee-especially not an employee for the purposes of the NMW or NLW.
Incidentally, VT software on the data input tab asks for "Average number of persons employed by the company" yet the balance sheet note says "Average number of employees" to add to the confusion.

And IRIS says "Directors would be included in the calculation but non-executive directors would not because they are not generally employed under a contract of service"

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By Southbankdelboy
28th May 2020 15:19

Yes, baffling-again!
We have been over this many times as others have pointed out.
A director is an officer of the company I do not think that means they are an employee-especially not an employee for the purposes of the NMW or NLW.
Incidentally, VT software on the data input tab asks for "Average number of persons employed by the company" yet the balance sheet note says "Average number of employees" to add to the confusion.

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