1. What exemptions are available?

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.

2. 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:

• annual turnover must be £2.8 million or less;
• the balance sheet total must be £1.4 million or less;
• 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:

• annual turnover must be £11.2 million or less;
• the balance sheet total must be £5.6 million or less;
• 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.

3. 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:

• the abbreviated balance sheet and notes; and
• 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:

• the abbreviated profit and loss account;
• the full balance sheet;
• a special auditor’s report; and
• 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.

4. 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:

• aggregate turnover must be £2.8 million net (£3.36 million gross) or less;
• the aggregate balance sheet total must be £1.4 million net (£1.68 million gross) or less;
• 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:

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

5. 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 exemption

1. What exemption is available?

There is total exemption from audit for certain small limited liability partnerships if they are eligible and wish to take advantage of it. Further details about how to claim exemption are in this section.

2. Which small limited liability partnerships qualify for audit exemption?

To qualify for total audit exemption, a limited liability partnership must:

• qualify as small;
• have a turnover of not more than £5.6 million; and
• have a balance sheet total of not more than £2.8 million.

3. Are all types of small limited liability partnership eligible for the exemption?

No. Audited (rather than unaudited) accounts must be delivered to Companies House if the limited liability partnership falls into any of the following categories:

(a) A parent limited liability partnership or subsidiary undertaking (unless dormant for the period during which it was a subsidiary) except where the group:

• qualifies as a small group or would qualify if all the bodies corporate in the group were companies ; and
• the turnover for the whole group is not more than £5.6 million net (or £6.72 million gross); and
• the group’s combined balance sheet total is not more than £2.8 million net (or £3.36 million gross).

(b) A member of a group in which any member is:

• a public company or body corporate which (not being a company) has power under its constitution to offer shares or debentures to the public;
• a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity;
• a person who carries on insurance market activity.

(c) A person (other than a banking limited liability partnership) who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity.

(d) For accounts delivered to the Registrar after 5 September 2005 a person who was during the relevant financial year an appointed representative within the meaning of s39 of the Financial Services and Markets Act 2000 (other than an appointed representative whose scope of appointment is limited to activities that are not regulated activities – see below).

“Regulated activity” does not include:

• arranging regulated mortgage contracts;
• assisting administration and performance of a contract of insurance;
• advising on regulated mortgage contracts; or
• dealing as agent, arranging deals in investments or advising on investments – where the activity concerns relevant investments that are not contractually based investment.

(e) A special register body or employers association under the Trade Union and Labour Relations (Consolidation) Act 1992.

4. What does an audit-exempt limited liability partnership need to send to Companies House?

If the limited liability partnership qualifies, unaudited accounts may be delivered to the Registrar in the form of an abbreviated balance sheet and notes containing statements to the following effect above the designated member’s signature:

1. For the year ended . . . (date) the limited liability partnership was entitled to exemption under section 249A(1) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001).
2. The members acknowledge their responsibility for:
   • ensuring the limited liability partnership keeps accounting records which comply with section 221; and
   • preparing accounts which give a true and fair view of the state of affairs of the limited liability partnership as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the limited liability partnership.
3. The accounts have been 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 limited liability partnerships.

If the limited liability partnership chooses, it may deliver the unabbreviated accounts prepared for its members. The same statements must appear on the unabbreviated balance sheet.

Please Note:
The statements for audit exemption should not include reference to section 249b(2), the members not requiring an audit. This section of the Act does not apply to LLPs and the statement should not be included on the balance sheet.

5. How long do I have to deliver accounts to Companies House?

The same time applies as for all other accounts. The same penalties are imposed for late filing.

6. Does an audit-exempt limited liability partnership still have to send accounts to its members?

Yes. In accordance with the Act, members have a right to receive and demand copies of the accounts.

7. Are annual accounts required if a limited liability partnership is not trading?

All limited liability partnerships, whether they trade or not, must prepare and deliver accounts to Companies House. However, a limited liability partnership may claim exemption from audit as a ‘dormant limited liability partnership’ if it has not traded during a financial year, and provided it meets certain other criteria.

Dormant limited liability partnerships do not need to appoint auditors and can deliver even simpler annual accounts to Companies House. For more information about dormant accounts, see the next section of this information.

Tags: audit exemption

1. What exemption is available?

Dormant limited liability partnerships can claim exemption from audit and need only deliver to Companies House an abbreviated balance sheet and notes. A profit-and-loss account does not have to be included in dormant accounts filed at Companies House. However, fuller accounts must still be prepared for members, possibly including a profit and loss account if the limited liability partnership traded in the previous year.

2. What is a dormant limited liability partnership?

A limited liability partnership is dormant if it has had no ’significant accounting transactions’ during the period.

‘Significant accounting transactions’ are transactions which are required to be entered in a limited liability partnership’s accounting records, but when considering whether the limited liability partnership is dormant, you can disregard the following financial transactions:

• fees paid to the Registrar for a change of limited liability partnership name and filing annual returns; and
• civil penalties imposed for delivering accounts to the Registrar after the statutory time allowed for filing.

A limited liability partnership may not take advantage of dormant status if it is a person (other than a banking limited liability partnership) who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity.

If the limited liability partnership has not been dormant since incorporation, but has become dormant, it may take advantage of the exemptions provided that:

• it has been dormant since the end of the previous financial year; and
• it does not have to prepare group accounts for that year; and
• it qualifies as a ’small limited liability partnership’ in relation to that year, or would have qualified as small but for the fact that it is a member of a group which included: a public company or body corporate which (not being a company) has power under its constitution to offer shares or debentures to the public, a person who has permission under Part 4 of the Financial Service and Markets Act 2000 to carry on a regulated activity, or a person who carries on insurance market activity.

3. What information must dormant accounts contain?

Dormant accounts filed at Companies House need not include a profit-and-loss account.

4. What statements are needed on the balance sheet?

The following statements must appear above the designated member’s signature

1. For the year ended . . . (date) the limited liability partnership was entitled to exemption under section 249AA(1) of the Companies Act 1985 (as applied to limited liability partnerships by regulation 3 of the Limited Liability Partnerships Regulations 2001).
2. The members acknowledge their responsibility for:
   • ensuring the limited liability partnership keeps accounting records which comply with section 221; and
   • preparing accounts which give a true and fair view of the state of affairs of the limited liability partnership as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the limited liability partnership.

   Please Note:

   The statements for audit exemption should not include reference to section 249b(2), the members not requiring an audit. This section of the Act does not apply to LLPs and the statement should not be included on the balance sheet.

5. How long do I have to deliver dormant accounts to Companies House?

The same time applies as for all other accounts. The same penalties are imposed for late filing.

6. What happens if my limited liability partnership starts trading again?

Any limited liability partnership exempt from the need to appoint auditors by reason of being dormant will cease to be exempt if the limited liability partnership:

• begins commercial or trading activities during the financial period; or
• disposed of an asset, settled a liability or conducted some other non-exempt transaction; or
• would no longer qualify for some other reason.

If any of these happened, fuller accounts would be required for the financial year in which the limited liability partnership ceased to be exempt, and the members might need to appoint auditors for the limited liability partnership. It may be that the limited liability partnership would qualify for certain exemptions as a medium-sized or small limited liability partnership.

Tags: audit exemption