Audit and assurance update: Increases to company size thresholds

On 18 March 2024, the then Conservative Government announced a proposal to increase the thresholds determining whether a company is a micro-entity, small, medium or large-sized company.

These were targeted at cutting complexity and reporting burdens and to reflect price changes since the last threshold increase in 2016.

The proposed and current thresholds are summarised below.

Threshold measure Current Proposed Current Proposed Current Proposed
Micro-entity Micro-entity Small-sized company Small-sized company Medium-sized company Medium-sized company
Turnover not exceeding £632,000 £1 m £10.2 m £15 m £36 m £54 m
Total assets (fixed plus current assets) not exceeding £316,000 £500,000 £5.1 m £7.5 m £18 m £27 m
Average number of employees not exceeding 10 10 50 50 250 250

In order to satisfy the criteria to be a certain size, two out of the three above thresholds must be met. Separately, a company will not qualify as a micro-entity, small or medium-sized company if it is ineligible or is part of an ineligible group, which includes a traded company or an insurance market activity.

The Conservative Government’s announcement did not contain details of the proposed small and medium-sized group thresholds, although it would be expected that these would be raised by similar proportions.

The above proposal was anticipated to be effective for accounting periods commencing on or after 1 October 2024.

On 14 October 2024, Sir Kier Starmer’s Labour Government announced they would be taking forward the proposal to increase the thresholds, with legislation due to be laid before Parliament by the end of the year and expected to come into force on 6 April 2025.

At the same time, it was announced that the Labour Government would not take forward proposals to amend the definition of a medium-sized company for reporting purposes, including the possible exemption for medium-sized companies from preparing a strategic report, which runs alongside their annual financial statements. Instead there will be a detailed consultation on the Future of Corporate Reporting, to be launched in 2025 and focussing on simplifying and modernising non-financial reporting. Medium-sized companies will be considered as part of this.

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