TT143: Group Accounts

October 22, 2009

Following recent changes to company law, medium sized groups of companies are now required to prepare group accounts.  These group accounts will need to be filed at Companies House.  Previously both small and medium sized groups were exempt from this requirement.

This means that if your company is the parent company of a medium sized group of companies, it must prepare accounts which combine its own financial performance and position with the financial performance and position of its subsidiary companies.

Such accounts are known as group or consolidated accounts.  Group accounts can be complex in nature, depending on the size and number of companies within the group. Barnes Roffe is widely experienced in dealing with group accounts with many clients who either form a “large” group or already choose voluntarily to prepare group accounts.

A seminar is being held on this important topic, including a group tax update, at our East London office on Thursday 29th October 2009. To book your place please visit the Client Zone area of the website.

How do I know if my company is affected?

The changes to company law are as a result of the introduction of the 2006 Companies Act.  The 2006 Companies Act had a phased implementation – with the medium sized group accounts exemption being removed for accounting periods beginning on or after 6 April 2008.

Therefore, companies with a year end of 30 April 2009 were generally the first to be affected (but note that if your company has an unusual year end – such as 5 April 2009, or prepares accounts for less than one year, your company may have been affected sooner).

A group of companies will qualify as being medium sized (as opposed to small) if two of the following three thresholds are exceeded for two consecutive years:-

  • Turnover – £6.5m net (£7.8m gross)
  • Gross Assets – £3.26m net (£3.9m gross)
  • Employees – 50

The calculation of group turnover and gross assets can be performed either “net” – after excluding transactions between group companies, or “gross” – without excluding transactions between group companies.

How do I know if my company is part of a group?

A group of companies will generally arise where one company has a controlling interest in one or more other companies – typically the “parent” company will own more than 50% of the ordinary share capital of the “subsidiary” company.  A company may have more than one subsidiary and similarly a company may be both a parent and a subsidiary.

Are there any exemptions?

Yes. Firstly, small groups of companies remain exempt from the requirement to prepare group accounts.

Companies which are both a parent and a subsidiary company are also likely to be exempt provided they form part of a larger group of companies for which group accounts are prepared.

Similarly, parent companies whose subsidiary interests can be considered immaterial are exempt from the requirement.

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