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Guidance on FRS 105 for micro-entities

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HMRC has published an overview paper setting out the key accounting changes and tax considerations arising for companies transitioning from the financial reporting standard for smaller entities (FRSSE) and old UK GAAP, to FRS 105 ‘The financial reporting standard applicable to the micro-entities regime’. For periods commencing on or after 1 January 2016, small businesses won’t be permitted to prepare their accounts in accordance with the FRSSE.

Although FRS 105 is mainly applicable to companies, partnerships and LLPs within the micro-entities regime, HMRC will generally accept calculations of profit for unincorporated businesses prepared under FRS 105 if they meet the relevant size criteria, that is, falling within at least two of the following:

  • turnover not exceeding £632,000
  • balance sheet total not exceeding £316,000
  • number of employees not exceeding 10

This guidance may therefore apply both to companies within the charge to corporation tax and to individuals and other entities within the charge to income tax. It is split into two main parts:

  • Part A compares ongoing accounting and tax differences between old UK GAAP and FRS 105; and
  • Part B summarises key accounting and tax adjustments arising on transition from old UK GAAP to FRS 105.

This paper is the latest addition to HMRC’s set of overview papers on FRS 100, FRS 101, FRS 102 and FRS 105, collectively known as ‘new UK GAAP’. See