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Every incorporated company in the UK (and certain UK charities) must have their financial statements audited annually. That’s unless the business or charity in question falls within several exemptions which can remove that requirement. 

Most directors are aware of the small company/charity limits but some directors and trustees can find that they are caught out by the separate rules around ineligible groups, rather than the company itself. 
Generally, ineligible groups include groups with any one of the following characteristics: 

• Public companies (unless they’re dormant)
• A subsidiary company within a group which is not small
• An authorised insurance company (or a company carrying out insurance market activity)
• Companies involved in banking or issuing e-money
• Markets in Financial Instruments Directive (MiFID) investment firms, or an Undertakings for Collective Investment in Transferable Securities (UCITS) management company
• Corporate bodies whose shares have been traded on a UK-regulated market.

Subsidiaries which would not normally qualify for the audit exemption under the second bullet point qualify. This is the case only if a parent provides a parental guarantee in respect of the liabilities of the subsidiary at the balance sheet date. Several minutes, resolutions and forms need to be filed, alongside the accounts of the subsidiary, claiming this exemption. The parent’s consolidated accounts, in English, must also be prepared under UK GAAP. 

For overseas companies in a non-English reporting jurisdiction, the additional cost of preparing audited consolidated group accounts (in English and under UK GAAP) can be considerably greater than the cost of an audit itself. 

Chat with us about annual audits…

We regularly conduct audits of UK subsidiaries of overseas parents and/or intermediate UK holding companies. Doing so in a cost-effective manner, we provide our clients with a pragmatic approach when it comes to meeting their UK reporting liabilities.

Have any questions about ineligible groups? Perhaps, for example, you’re keen to know if your company falls under that category, or you may want to find out if you’re an FCA-regulated MiFID Firm.

If so, do not hesitate to contact our audit team here at Arnold Hill if you think that you may need to appoint an auditor. We will be more than happy to answer any of your queries.