Small or medium sized company
Company law

Companies qualifying as small or medium sized enterprises (SMEs) qualify for certain exceptions and exemptions from the usual statutory obligations under the Companies Act.

The size, turnover, balance sheet total and number of employees are used to calculate whether the company qualifies as an SME.

Small companies are those that have:

1. an annual turnover of £5.6 million or less
2. total fixed and current assets on its balance sheet of £2.8 million or less and
3. 50 employees or less.

Medium sized enterprises are those that have:

1. an annual turnover of £22.8 million or less
2. total fixed and current assets on its balance sheet £11.4 million or less and
3. 250 employees or less.

These are the statutory criterion since 30 January 2004. Prior to that date the criterion for the first two items in each list above was half its present value. When assessing holding companies, the balance sheet, turnover and number of employees of its subsidiaries are taken into account when determining the relevant statistics. Special rules apply to companies qualifying for exemptions, and an audit must prepared.

Public companies, companies that are subsidiaries of public companies, Also companies in certain regulated sectors are not capable of qualifying as SMEs.

Small companies may deliver abbreviated balance sheet and notes to Companies House and a special auditor's report; and medium sized enterprises must deliver an abbreviated profit and loss account, balance sheet, special auditor's report, a director's report and notes to the accounts. The special auditor's report simply states that the company qualifies for the exemption and that the accounts have been prepared in accordance with the Companies Act.

Special rules also apply to SMEs within a group. Companies qualifying as Very Small Companies may qualify for an exemption to file an audit with Companies House.