The Companies Act 1985 (Accounts of Small and Medium-sized Companies and Minor Accounting Amendments) Regulations 1997

• Citation: S.I. 1997/220
• Sections: 197

Section 1 Citation, interpretation and commencement etc.

(1) These Regulations may be cited as the Companies Act 1985 (Accounts of Small and Medium-sized Companies and Minor Accounting Amendments) Regulations 1997.

(2) In these Regulations “the 1985 Act ” means the Companies Act 1985.

(3) These Regulations—

(a) shall come into force on 1st March 1997; and

(b) subject to paragraph (4), shall apply to annual accounts approved by the board of directors on or after that day, and to directors' and auditors' reports on such accounts.

(4) A company may, with respect to a financial year of the company ending on or before 24th March 1997, prepare and deliver to the registrar of companies such annual accounts and directors' and auditors' reports as it would have been required to prepare and deliver had the amendments to the 1985 Act effected by these Regulations not been made.

Section 2 Special provisions for small companies

(1) For section 246 of the 1985 Act there shall be substituted the following section—

Special provisions for small companies

(246)

(1) Subject to section 247A, this section applies where a company qualifies as a small company in relation to a financial year.

(2) If the company’s individual accounts for the year—

(a) comply with the provisions of Schedule 8, or

(b) fail to comply with those provisions only in so far as they comply instead with one or more corresponding provisions of Schedule 4,

they need not comply with the provisions or, as the case may be, the remaining provisions of Schedule 4; and where advantage is taken of this subsection, references in section 226 to compliance with the provisions of Schedule 4 shall be construed accordingly.

(3) The company’s individual accounts for the year need not give the information required by—

(a) paragraph 4 of Schedule 5 (financial years of subsidiary undertakings);

(b) paragraph 1(3) of Schedule 6 (breakdown of aggregate amount of directors' emoluments);

(c) paragraphs 2 to 5 of Schedule 6 (details of chairman’s and directors' emoluments); or

(d) paragraph 7 of Schedule 6 (pensions of directors and past directors).

(4) The directors' report for the year need not give the information required by—

(a) section 234(1)(a) and (b) (fair review of business and amount to be paid as dividend);

(b) paragraph 1(2) of Schedule 7 (statement of market value of fixed assets where substantially different from balance sheet amount);

(c) paragraph 6 of Schedule 7 (miscellaneous disclosures); or

(d) paragraph 11 of Schedule 7 (employee involvement).

(5) Notwithstanding anything in section 242(1), the directors of the company need not deliver to the registrar any of the following, namely–

(a) a copy of the company’s profit and loss account for the year;

(b) a copy of the directors' report for the year; and

(c) if they deliver a copy of a balance sheet drawn up as at the last day of the year which complies with the requirements of Schedule 8A, a copy of the company’s balance sheet drawn up as at that day.

(6) Neither a copy of the company’s accounts for the year delivered to the registrar under section 242(1), nor a copy of a balance sheet delivered to the registrar under subsection (5)(c), need give the information required by–

(a) paragraph 4 of Schedule 5 (financial years of subsidiary undertakings);

(b) paragraph 6 of Schedule 5 (shares of company held by subsidiary undertakings);

(c) Part I of Schedule 6 (directors' and chairman’s emoluments, pensions and compensation for loss of office); or

(d) section 390A(3) (amount of auditors' remuneration).

(7) The provisions of section 233 as to the signing of the copy of the balance sheet delivered to the registrar apply to a copy of a balance sheet delivered under subsection (5)(c).

(8) Subject to subsection (9), each of the following, namely–

(a) accounts prepared in accordance with subsection (2) or (3),

(b) a report prepared in accordance with subsection (4), and

(c) a copy of accounts delivered to the registrar in accordance with subsection (5) or (6),

shall contain a statement in a prominent position on the balance sheet, in the report or, as the case may be, on the copy of the balance sheet, above the signature required by section 233, 234A or subsection (7), that they are prepared in accordance with the special provisions of this Part relating to small companies.

(9) Subsection (8) does not apply where the company is exempt by virtue of section 250 (dormant companies) from the obligation to appoint auditors.

(2) For Schedule 8 to the 1985 Act there shall be substituted the provisions set out in Schedule 1 to these Regulations.

(3) After Schedule 8 to the 1985 Act there shall be inserted, as Schedule 8A, the provisions set out in Schedule 2 to these Regulations.

Section 3 Special provisions for medium-sized companies

After section 246 of the 1985 Act there shall be inserted the following section—

Special provisions for medium-sized companies

(246A)

(1) Subject to section 247A, this section applies where a company qualifies as a medium-sized company in relation to a financial year.

(2) The company’s individual accounts for the year need not comply with the requirements of paragraph 36A of Schedule 4 (disclosure with respect to compliance with accounting standards).

(3) The company may deliver to the registrar a copy of the company’s accounts for the year—

(a) which includes a profit and loss account in which the following items listed in the profit and loss account formats set out in Part I of Schedule 4 are combined as one item under the heading “gross profit or loss”—

Items 1, 2, 3 and 6 in Format 1;

Items 1 to 5 in Format 2;

Items A.1, B.1 and B.2 in Format 3;

Items A.1, A.2 and B.1 to B.4 in Format 4;

(b) which does not contain the information required by paragraph 55 of Schedule 4 (particulars of turnover).

(4) A copy of accounts delivered to the registrar in accordance with subsection (3) shall contain a statement in a prominent position on the copy of the balance sheet, above the signature required by section 233, that the accounts are prepared in accordance with the special provisions of this Part relating to medium-sized companies.

Section 4 Cases in which special provisions do not apply

After section 247 of the 1985 Act there shall be inserted the following section—

Cases in which special provisions do not apply

(247A)

(1) Nothing in section 246 or 246A shall apply where—

(a) the company is, or was at any time within the financial year to which the accounts relate—

(i) a public company,

(ii) a banking or insurance company, or

(iii) an authorised person under the Financial Services Act 1986; or

(b) the company is, or was at any time during that year, a member of an ineligible group.

(2) A group is ineligible if any of its members is—

(a) a public company or a body corporate which (not being a company) has power under its constitution to offer its shares or debentures to the public and may lawfully exercise that power,

(b) an authorised institution under the Banking Act 1987,

(c) an insurance company to which Part II of the Insurance Companies Act 1982 applies, or

(d) an authorised person under the Financial Services Act 1986.

(3) A parent company shall not be treated as qualifying as a small company in relation to a financial year unless the group headed by it qualifies as a small group, and shall not be treated as qualifying as a medium-sized company in relation to a financial year unless that group qualifies as a medium-sized group (see section 249).

Section 5 Special auditors' report

After section 247A of the 1985 Act there shall be inserted the following section—

Special auditors' report

(247B)

(1) This section applies where—

(a) the directors of a company propose to deliver to the registrar copies of accounts (“abbreviated accounts”) prepared in accordance with section 246(5) or (6) or 246A(3) (“the relevant provision”),

(b) the directors have not taken advantage of the exemption from audit conferred by section 249A(1) or (2), and

(c) the company is not exempt by virtue of section 250 from the obligation to appoint auditors.

(2) If abbreviated accounts prepared in accordance with the relevant provision are delivered to the registrar, they shall be accompanied by a copy of a special report of the auditors stating that in their opinion—

(a) the company is entitled to deliver abbreviated accounts prepared in accordance with that provision, and

(b) the abbreviated accounts to be delivered are properly prepared in accordance with that provision.

(3) In such a case a copy of the auditors' report under section 235 need not be delivered, but—

(a) if that report was qualified, the special report shall set out that report in full together with any further material necessary to understand the qualification; and

(b) if that report contained a statement under—

(i) section 237(2) (accounts, records or returns inadequate or accounts not agreeing with records and returns), or

(ii) section 237(3) (failure to obtain necessary information and explanations),

the special report shall set out that statement in full.

(4) Section 236 (signature of auditors' report) applies to a special report under this section as it applies to a report under section 235.

(5) If abbreviated accounts prepared in accordance with the relevant provision are delivered to the registrar, references in section 240 (requirements in connection with publication of accounts) to the auditors' report under section 235 shall be read as references to the special auditors' report under this section.

Section 6 Group accounts prepared by small company

After section 248 of the 1985 Act there shall be inserted the following section–

Group accounts prepared by small company

(248A)

(1) This section applies where a small company–

(a) has prepared individual accounts for a financial year in accordance with section 246(2) or (3), and

(b) is preparing group accounts in respect of the same year.

(2) If the group accounts–

(a) comply with the provisions of Schedule 8, or

(b) fail to comply with those provisions only in so far as they comply instead with one or more corresponding provisions of Schedule 4,

they need not comply with the provisions or, as the case may be, the remaining provisions of Schedule 4; and where advantage is taken of this subsection, references in Schedule 4A to compliance with the provisions of Schedule 4 shall be construed accordingly.

(3) For the purposes of this section, Schedule 8 shall have effect as if, in each balance sheet format set out in that Schedule, for item B.III there were substituted the following item–

B.III Investments

(1) Shares in group undertakings

(2) Interests in associated undertakings

(3) Other participating interests

(4) Loans to group undertakings and undertakings in which a participating interest is held

(5) Other investments other than loans

(6) Others.

(4) The group accounts need not give the information required by the provisions specified in section 246(3).

(5) Group accounts prepared in accordance with this section shall contain a statement in a prominent position on the balance sheet, above the signature required by section 233, that they are prepared in accordance with the special provisions of this Part relating to small companies.

Section 7 Minor and consequential amendments

(1) In subsection (5)(b) of section 171 of the 1985 Act (power of private companies to redeem or purchase own shares out of capital) after “paragraph 34 of Schedule 4” there shall be inserted “or paragraph 34 of Schedule 8”.

(2) In section 247(5) of the 1985 Act (calculation of balance sheet total for determining whether company small or medium-sized) after “Part I of Schedule 4” there shall be inserted “or Part I of Schedule 8”.

(3) In section 249C(6) of the 1985 Act (provisions of Part VII on which reporting accountant has to give opinion) , for “section 246(1)(a) and (1A) and Section A of Part I of Schedule 8” there shall be substituted “section 246(2) and (3)”.

(4) In section 250 of the 1985 Act (resolution not to appoint auditors) —

(a) in subsection (1)(b), for sub-paragraph (i) there shall be substituted—

(i) is entitled in respect of its individual accounts for that year to prepare accounts in accordance with section 246(2), or would be so entitled but for the application of subsection (1)(a)(i) or (b) of section 247A, and,

(b) in subsection (4), for paragraph (d) there shall be substituted—

(d) the company shall be treated as a company entitled to prepare accounts in accordance with section 246(2) notwithstanding that it is a member of an ineligible group.

(5) In section 260(6) of the 1985 Act (meaning of “participating interest” in balance sheet and profit and loss account formats) after “Schedule 4,” there shall be inserted “Part I of Schedule 8, Schedule 8A,”.

(6) In the index of defined expressions set out in section 262A of the 1985 Act —

(a) in the entry relating to “historical cost accounting rules”, there shall be inserted at the appropriate place the words—

(b) in the entry relating to “listed investment”, there shall be inserted at the appropriate place the words—

(c) for the entry relating to “pension costs” there shall be substituted the following entry—

(d) in the entry relating to “provision”, there shall be inserted at the appropriate place—

(e) in the entry relating to “social security costs”, there shall be inserted at the appropriate place—

(7) In subsection (2)(b) of section 269 of the 1985 Act (treatment of development costs), after “paragraph 20 of Schedule 4” there shall be inserted “paragraph 20 of Schedule 8”.

(8) In paragraph (b) of section 276 of the 1985 Act (distributions in kind) after “Schedule 4” there shall be inserted “or paragraphs 12(a) and 34(3)(a) of Schedule 8”.

(9) In paragraph 48(1) of Schedule 4 and paragraph 68(1) of Schedule 9A to the 1985 Act (statement in notes to accounts of details of indebtedness) , for paragraph (b) there shall be substituted—

(b) in the case of any debts so included which are payable or repayable by instalments, the amount of any instalments which fall due for payment after the end of that period.

(10) In Schedule 4A to the 1985 Act—

(a) paragraph 1(2) (application of paragraph 59 of Schedule 4 to group accounts) is hereby repealed; and

(b) in paragraph 19(2) (application of provisions of Schedule 4A to proportional consolidation) for “this Part” substitute “this Schedule”.

(11) Paragraph 2(1) (a) in Part II of Schedule 9 to the 1985 Act (application to accounts of banking groups of individual accounts provisions) is hereby repealed.

(12) Paragraph 1(2) (b) in Part II of Schedule 9A to the 1985 Act (application to accounts of insurance groups of individual accounts provisions) is hereby repealed.

A

Called up share capital not paid (1)

B

Fixed assets

(I) Intangible assets

(1) Goodwill (2)

(2) Other intangible assets (3)

(II) Tangible assets

(1) Land and buildings

(2) Plant and machinery etc.

(III) Investments

(1) Shares in group undertakings and participating interests

(2) Loans to group undertakings and undertakings in which the company has a participating interest

(3) Other investments other than loans

(4) Other investments (4)

C

Current assets

(I) Stocks

(1) Stocks

(2) Payments on account

(II) Debtors (5)

(1) Trade debtors

(2) Amounts owed by group undertakings and undertakings in which the company has a participating interest

(3) Other debtors

(III) Investments

(1) Shares in group undertakings

(2) Other investments

(IV) Cash at bank and in hand

D

Prepayments and accrued income (6)

E

Creditors: amounts falling due within one year

(1) Bank loans and overdrafts

(2) Trade creditors

(3) Amounts owed to group undertakings and undertakings in which the company has a participating interest

(4) Other creditors (7)

F

Net current assets (liabilities) (8)

G

Total assets less current liabilities

H

Creditors: amounts falling due after more than one year

(1) Bank loans and overdrafts

(2) Trade creditors

(3) Amounts owed to group undertakings and undertakings in which the company has a participating interest

(4) Other creditors (7)

I

Provisions for liabilities and charges

J

Accruals and deferred income (7)

K

Capital and reserves

(I) Called up share capital (9)

(II) Share premium account

(III) Revaluation reserve

(IV) Other reserves

(V) Profit and loss account

A ASSETS

Called up share capital not paid (1)

B ASSETS

Fixed assets

(I) Intangible assets

(1) Goodwill (2)

(2) Other intangible assets (3)

(II) Tangible assets

(1) Land and buildings

(2) Plant and machinery etc.

(III) Investments

(1) Shares in group undertakings and participating interests

(2) Loans to group undertakings and undertakings in which the company has a participating interest

(3) Other investments other than loans

(4) Other investments (4)

C ASSETS

Current assets

(I) Stocks

(1) Stocks

(2) Payments on account

(II) Debtors (5)

(1) Trade debtors

(2) Amounts owed by group undertakings and undertakings in which the company has a participating interest

(3) Other debtors

(III) Investments

(1) Shares in group undertakings

(2) Other investments

(IV) Cash at bank and in hand

D ASSETS

Prepayments and accrued income (6)

A LIABILITIES

Capital and reserves

(I) Called up share capital (9)

(II) Share premium account

(III) Revaluation reserve

(IV) Other reserves

(V) Profit and loss account

B LIABILITIES

Provisions for liabilities and charges

C LIABILITIES

Creditors (10)

(1) Bank loans and overdrafts

(2) Trade creditors

(3) Amounts owed to group undertakings and undertakings in which the company has a participating interest

(4) Other creditors (7)

D LIABILITIES

Accruals and deferred income (7)

Section 1

(1) Subject to the following provisions of this Schedule—

(a) every balance sheet of a small company shall show the items listed in either of the balance sheet formats set out below in section B of this Part; and

(b) every profit and loss account of a small company shall show the items listed in any one of the profit and loss account formats so set out;

in either case in the order and under the headings and sub-headings given in the format adopted.

(2) Sub-paragraph (1) above is not to be read as requiring the heading or sub-heading for any item to be distinguished by any letter or number assigned to that item in the format adopted.

Section 1

Turnover

Section 1

Turnover

Section 1 A. Charges

Cost of sales (11)

Section 1 B. Income

Turnover

Section 1 A. Charges

Reduction in stocks of finished goods and in work in progress

Section 1 B. Income

Turnover

Section 2

(1) Where in accordance with paragraph 1 a small company’s balance sheet or profit and loss account for any financial year has been prepared by reference to one of the formats set out in section B below, the directors of the company shall adopt the same format in preparing the accounts for subsequent financial years of the company unless in their opinion there are special reasons for a change.

(2) Particulars of any change in the format adopted in preparing a small company’s balance sheet or profit and loss account in accordance with paragraph 1 shall be disclosed, and the reasons for the change shall be explained, in a note to the accounts in which the new format is first adopted.

Section 2

Cost of sales (11)

Section 2

Change in stocks of finished goods and in work in progress

Section 2 A. Charges

Distribution costs (11)

Section 2 B. Income

Other operating income

Section 2 A. Charges

(a) Raw materials and consumables

(b) Other external charges

Section 2 B. Income

Increase in stocks of finished goods and in work in progress

Section 3

(1) Any item required in accordance with paragraph 1 to be shown in a small company’s balance sheet or profit and loss account may be shown in greater detail than required by the format adopted.

(2) A small company’s balance sheet or profit and loss account may include an item representing or covering the amount of any asset or liability, income or expenditure not otherwise covered by any of the items listed in the format adopted, but the following shall not be treated as assets in any small company’s balance sheet—

(a) preliminary expenses;

(b) expenses of and commission on any issue of shares or debentures; and

(c) costs of research.

(3) In preparing a small company’s balance sheet or profit and loss account the directors of the company shall adapt the arrangement and headings and sub-headings otherwise required by paragraph 1 in respect of items to which an Arabic number is assigned in the format adopted, in any case where the special nature of the company’s business requires such adaptation.

(4) Items to which Arabic numbers are assigned in any of the formats set out in section B below may be combined in a small company’s accounts for any financial year if either—

(a) their individual amounts are not material to assessing the state of affairs or profit or loss of the company for that year; or

(b) the combination facilitates that assessment;

but in a case within paragraph (b) the individual amounts of any items so combined shall be disclosed in a note to the accounts.

(5) Subject to paragraph 4(3) below, a heading or sub-heading corresponding to an item listed in the format adopted in preparing a small company’s balance sheet or profit and loss account shall not be included if there is no amount to be shown for that item in respect of the financial year to which the balance sheet or profit and loss account relates.

(6) Every profit and loss account of a small company shall show the amount of the company’s profit or loss on ordinary activities before taxation.

(7) Every profit and loss account of a small company shall show separately as additional items—

(a) any amount set aside or proposed to be set aside to, or withdrawn or proposed to be withdrawn from, reserves;

(b) the aggregate amount of any dividends paid and proposed.

Section 3

Gross profit or loss

Section 3

Own work capitalised

Section 3 A. Charges

Administrative expenses (11)

(4) Amounts written off investments

Section 3 B. Income

Income from shares in group undertakings

Section 3 A. Charges

Staff costs:

(a) wages and salaries

(b) social security costs

(c) other pension costs

Section 3 B. Income

Own work capitalised

Section 4

(1) In respect of every item shown in a small company’s balance sheet or profit and loss account the corresponding amount for the financial year immediately preceding that to which the balance sheet or profit and loss account relates shall also be shown.

(2) Where that corresponding amount is not comparable with the amount to be shown for the item in question in respect of the financial year to which the balance sheet or profit and loss account relates, the former amount shall be adjusted and particulars of the adjustment and the reasons for it shall be disclosed in a note to the accounts.

(3) Paragraph 3(5) does not apply in any case where an amount can be shown for the item in question in respect of the financial year immediately preceding that to which the balance sheet or profit and loss account relates, and that amount shall be shown under the heading or sub-heading required by paragraph 1 for that item.

Section 4

Distribution costs (11)

Section 4

Other operating income