Overseas groups are often observed to be unsure about what the UK law requires from them for the audit when they are connected to UK subsidiaries. They should realise that if they will fail to comply this can result in costs for them. However, there are some cases of audit exemptions but what is an audit exemption? This comprehensive guide will cover the basics you need to about the required audit standards under UK law.
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What is an Audit Exemption – Audit Exemptions For Overseas Parent Companies
This is common among business individuals that the UK law requires an audit for companies that carry out business there. However, if you are able to achieve certain criteria, there are a few exemptions from this UK rule.
The eligibility depends on what is the size of your company as well as the group. The word ‘group’ refers to the consolidated position. Which is an accounting term. A parent company connected to the subsidiaries is explained through this term here. Small businesses have the option to enjoy an audit exemption. Do you wonder how would you calculate the parameters of claiming to be a small business?
If you come under any two of the following listed threshold conditions, you are carrying out a small business:
- If your company’s threshold is £10.2 million maximum or anything below this.
- If your company’s assets are £5.1 million or anything below this.
- The average strength of your company’s employees is 50 or below this figure.
In case the company carries does not carry out small business, there is no chance to avail small business audit exceptions.
Furthermore, there should be a consideration of the size of the global group if your company is connected to it. In case of meeting more than two of the following listed points, there will be a requirement for an audit by the UK subsidiary.
- If the net turnover of the business is £10.2 million or £12.2 million gross.
- In case total assets are £5.1 million or £6.1 million gross.
- The average strength of employees is 50.
Parental Guarantee – Exemptions
Such companies in the UK who has their parent companies overseas can avail of an audit exemption under certain circumstances. If the overse3es parent company was established on 31st December 2020 in the European Economic Area (EEA). Audit exemptions are available for such companies.
Moreover, there are some other conditions to qualify for an audit exemption under UK law. This includes the following:
- Non-controlling interest evidence must be provided by the EEA parent company.
- The subsidiary must approve the guarantee provided by the parent company.
- There is a requirement to file audited accounts on the UK public register.
- There is a chance of your information going public after this which is not a normal case so specific instructions must be attached.
If you are interested in asking a professional about how to get an audit exemption as an overseas parent company, get in touch with one of our experts and get instant help! We are available Monday to Friday from 9:00 AM till 5:30 PM.
What are the Penalties if A Director Fails to Comply?
There are practical consequences if your company fails to go under audit even when it is a legal requirement under the law. They are listed below for you:
- The directors are suggested to consider if the old and earlier accounts need an audit.
- Old audited files are needed to be refiled and the director did not take the fair steps to ensure it will result in facing serious consequences and penalties.
- If the directors fail to comply and the serious deadlines for the cause have passed. The penalties will be double costly and will definitely cause damage to the business.
- Private companies in case of penalties will have to pay up to a limit of £1,500.
- In the case of public companies, an amount of £7,500 limit will be there to handle as penalties.
Moreover, the eligibility to seek investments and funding is also denied in case you are dealing with penalties.
Now that the basic information about what is an audit exemption is gathered, the discussion is summed up finally. The terms and conditions to be eligible for the audit exemption must be taken into serious consideration. Otherwise, the consequences can be quite damaging for your business’s future.
In order to avoid the penalties and any damage caused to your business, it is always wise to seek professional help. We hope the few minutes of reading will help you make wise business decisions and avoid any kind of penalties.
Disclaimer: The information about what is an audit exemption provided in this article is general in nature. It does not intend to disregard any professional advice.