Audit of foreign companies in the UK: what you need to know
All British companies must be audited regularly - a formal, in-depth examination of the company's accounting records, bank accounts, and a complete inventory of assets. A foreign company in Great Britain must also be audited according to this requirement. However, there are exceptions. Small private companies with limited liability, as well as branches of some foreign organizations are exempt from the audit if they meet certain conditions.
Who is exempt from audit in Great Britain
From September 6, 2012 small and medium-sized companies with limited liability can apply for exemption from audit at the Registrar's Office. To do so, you must meet the following requirements:
- file annual accounts on time;
- have an annual turnover of up to £10.2 million;
- have an asset value below £5.1 million;
- have a staff of no more than 50 people.
If the company provides insurance, investment or banking services, the exemption does not apply to it.
Exemption from audit for a branch of the foreign company
British branches of foreign companies whose head office is registered in the European Economic Area can obtain an exemption if they meet the same conditions as small private businesses.
In order not to be audited, the consolidated accounts of the parent company must be entered in the national register of the UK. It must be in English. This can lead to information that would otherwise be classified in the public domain. Therefore, it is better to find out in advance whether it is appropriate to use the parent company guarantee for exemption from the audit.
Businesses that are exempt from an audit must file:
- Abbreviated Statements to the Registrar's Office. This must include a balance sheet and an explanation of the accounts;
- Full accounts to HMRC (Her Majesty's Revenue and Customs). It includes the balance sheet, profit and loss account, director's report, notes to the accounts.
Will the bank account be audited
A corporate bank account will only be audited if the company has to have its annual accounts fully audited by an independent accountant. Therefore, we recommend only using it for business transactions so as not to confuse accounting in the UK.
If the company does not pass the audit on time, will be fined up to £7.5 thousand. If the auditor finds a violation, the director may even face criminal liability and a fine.
Audit: to do or not to do
Although most small private limited companies are exempt from audits, they can be audited if:
- a regular audit is required by statute;
- an audit is requested by a shareholder who owns at least 10% of the company's shares.
If you ensure that your annual accounts are accurate, your business and accounting records are kept correctly, and you do not withhold the right information from the tax authorities, an audit in UK 2022 should not cause problems for you or your organization.
Not only that, the audit will only be beneficial, as its purpose is to confirm the purity of financial transactions, the accuracy of the figures that are stated in its annual accounts. It is a great way to convince investors in its reliability, to encourage them to invest money.
How to pass an audit in the UK without problems
To find out whether your organization needs an audit, and if so, to pass it successfully, contact IT-OFFSHORE experts.