Certain small or medium-sized limited liability partnerships may prepare accounts for their members under the special provisions of sections 246 and 246A of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001). In addition, they may prepare and deliver abbreviated accounts to the Registrar.

This section explains the exemptions available to small and medium-sized limited liability partnerships. Certain small limited liability partnerships with a turnover of less than £5.6 million and assets of less than £2.8 million can claim exemption from audit.

What is a small or medium-sized limited liability partnership?

Certain limited liability partnerships, especially in the regulated sectors, cannot qualify as small or medium-sized companies. Similarly, limited liability partnerships which are part of a group which has members who are public companies or companies in the regulated sector cannot qualify as small or medium-sized (except in certain circumstances). For other limited liability partnerships, the size of the limited liability partnership (and in the case of a parent limited liability partnership the size of the group headed by it) in terms of its turnover, balance sheet total (meaning the total of the fixed and current assets) and average number of employees determines whether it is classed as small or medium-sized. A summary of the conditions is given below.

To be a small limited liability partnership, at least 2 of the following conditions must be met:

Please note: The above accounting exemption thresholds apply to financial years beginning on or after 30 January 2004. For earlier financial years, to be a small limited liability partnership, at least two of the following conditions must be met:

1. annual turnover must be £2.8 million or less;
2. the balance sheet total must be £1.4 million or less;
3. the average number of employees must be 50 or fewer.

To be a medium-sized limited liability partnership, at least 2 of the following conditions must be met:

1. annual turnover must be £11.2 million or less;
2. the balance sheet total must be £5.6 million or less;
3. the average number of employees must be 250 or fewer.

Generally, a limited liability partnership qualifies as ’small’ or ‘medium-sized’ in its first financial year, or in any subsequent financial year if it fulfils the conditions in that year and the year before. If the limited liability partnership ceases to be small or medium-sized, the exemption continues for the first year that the limited liability partnership does not fulfil the conditions. The exemption continues uninterrupted if the limited liability partnership reverts to being small or medium-sized the following year - see the table below.

If you think the limited liability partnership might qualify as small or medium-sized, you should consult a professional accountant before you prepare ’special-provision’ accounts.

If you abbreviate the accounts, you will also need a special auditor’s report for filing with the Registrar, confirming that the limited liability partnership qualifies to produce such accounts. This report is not needed if the limited liability partnership is exempt from audit.

What does a small or medium-sized limited liability partnership have to deliver to the Registrar?

The limited liability partnership can deliver the accounts which were prepared for its members under the special provisions of Part VII of the Companies Act 1985 as applied to limited liability partnerships, or it can deliver an abbreviated version of these accounts.

Abbreviated accounts of a small limited liability partnership must include:

1. the abbreviated balance sheet and notes; and
2. a special auditor’s report (unless the limited liability partnership is also claiming audit exemption).

Abbreviated accounts of a medium-sized limited liability partnership must include:

1. the abbreviated profit and loss account;
2. the full balance sheet;
3. a special auditor’s report; and
4. notes to the accounts.

The special auditor’s report should state that in the auditor’s opinion the limited liability partnership is entitled to deliver abbreviated accounts and that they have been properly prepared in accordance with section 246(5) or (6) or 246A(3) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3(1) of the Limited Liability Partnerships Regulations 2001), as the case may be.

The balance sheet must contain a statement that the accounts are prepared in accordance with the special provisions in Part VII of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001) relating to small or medium-sized limited liability partnerships, as the case may be.

Are there special rules for small and medium-sized groups?

Yes, a parent limited liability partnership need not prepare group accounts or send them to the Registrar if the group is small or medium-sized and none of its members is a public company or a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity, or a person who carries on insurance market activity.

To qualify as small, a group must meet at least 2 of the following conditions:

1. aggregate turnover must be £2.8 million net (£3.36 million gross) or less;
2. the aggregate balance sheet total must be £1.4 million net (£1.68 million gross) or less;
3. the aggregate average number of employees must be 50 or fewer.

To qualify as medium-sized, a group must satisfy at least 2 of the following conditions:

1. aggregate turnover must be £22.8 million net (or £27.36 million gross);
2. the aggregate balance sheet total must be £11.4 million net (or £13.68 million gross);
3. the aggregate average number of employees must be 250 or fewer.

What if a small or medium-sized limited liability partnership is required to prepare group accounts?

A small parent limited liability partnership which has prepared individual accounts for its members using the special provisions of section 246(2) or (3) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001), may choose to prepare group accounts under the special provisions of section 248A. However, a small group cannot file abbreviated accounts at Companies House. Group accounts prepared under section 248A must contain a statement above the signature on the balance sheet, confirming that they are prepared in accordance with the special provisions of section 248A relating to small limited liability partnerships.

If a medium-sized limited liability partnership prepares group accounts, they must be full group accounts.

Tags: audit exemptions