New Company Size and Audit Limits!

Following a period of consultation, the Government recently announced large increases in company size and audit limits, along with plans to change the narrative reporting requirements for certain companies.

Company and Audit size changes

The changes are due to take effect for periods commencing on or after 1 October 2024, and the new size limits are as follows:

To qualify for each size, companies need to meet 2 out of 3 the size criteria for two consecutive periods, although of course ineligible companies or those in an ineligible group remain unable to be anything other than large.

When applying the new size limits, the company must reassess past periods in light of the new rules, so consider the following company:

Under the current rules the entity would be medium sized, but when we come to the first year under new rules, it would have qualified as small if the new rules had always been in place, so could be small in 2025.

As long as the entity is not in a non-small group or is made ineligible by its regulatory status, then it can be audit exempt in 2025 as well.

For those companies now considering a move to the micro entity regime, note that you would assess the company against the micro limits, on the basis of micro entity accounting policies. For example, all assets held at cost less impairment and depreciation.

Future plans

To further reduce the regulatory burden for companies, there will be another consultation on amending the definition of a medium-sized company to increase the maximum number of employees from 250 to 500. There will also be consultation on exempting medium-sized companies from producing a strategic report.

The ICAEW summary of changes can be seen here UK company size thresholds to rise | ICAEW.