{"id":5853,"date":"2023-09-18T10:47:57","date_gmt":"2023-09-18T10:47:57","guid":{"rendered":"https:\/\/www.georgehay.co.uk\/blogs\/?p=5853"},"modified":"2023-09-18T10:47:57","modified_gmt":"2023-09-18T10:47:57","slug":"uk-subsidiaries-do-you-need-an-audit","status":"publish","type":"post","link":"https:\/\/www.georgehay.co.uk\/blogs\/2023\/09\/uk-subsidiaries-do-you-need-an-audit\/","title":{"rendered":"UK subsidiaries: Do you need an audit?"},"content":{"rendered":"<p>Many UK subsidiaries of overseas \u2018parent\u2019 companies are unaware that they may be required to have an audit.<\/p>\n<p>This is concerning given that so many international organisations use UK subsidiaries. This could be to scale up their operations or to move into new markets.<\/p>\n<p>Once an overseas entity establishes a UK subsidiary, it must meet new obligations in respect of UK tax and accounting.<\/p>\n<p>Failure to meet these obligations can result in significant financial penalties and, in some cases, more serious sanctions.<\/p>\n<h5>Does my UK subsidiary need an audit?<\/h5>\n<p>UK companies are required to have an audit, unless they meet certain criteria that affords them an exemption.<\/p>\n<p>A company or LLP is exempt if it is deemed \u2018small\u2019, or is not actively trading \u2013 i.e., it is dormant.<\/p>\n<p>If two out of the following thresholds are breached, the company is unlikely to be exempt from audit:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-5854\" src=\"https:\/\/www.georgehay.co.uk\/blogs\/wp-content\/uploads\/2023\/09\/UK-subsidiaries-conditions-table.png\" alt=\"\" width=\"2941\" height=\"443\" srcset=\"https:\/\/www.georgehay.co.uk\/blogs\/wp-content\/uploads\/2023\/09\/UK-subsidiaries-conditions-table.png 2941w, https:\/\/www.georgehay.co.uk\/blogs\/wp-content\/uploads\/2023\/09\/UK-subsidiaries-conditions-table-300x45.png 300w, https:\/\/www.georgehay.co.uk\/blogs\/wp-content\/uploads\/2023\/09\/UK-subsidiaries-conditions-table-1024x154.png 1024w, https:\/\/www.georgehay.co.uk\/blogs\/wp-content\/uploads\/2023\/09\/UK-subsidiaries-conditions-table-768x116.png 768w, https:\/\/www.georgehay.co.uk\/blogs\/wp-content\/uploads\/2023\/09\/UK-subsidiaries-conditions-table-1536x231.png 1536w, https:\/\/www.georgehay.co.uk\/blogs\/wp-content\/uploads\/2023\/09\/UK-subsidiaries-conditions-table-2048x308.png 2048w\" sizes=\"auto, (max-width: 2941px) 100vw, 2941px\" \/><\/p>\n<p>Where a UK subsidiary is part of a group, it is the size of the whole worldwide group which matters. If the group is not small, the UK subsidiary will not be able to claim the exemption.<\/p>\n<p>In addition, there are certain groups and companies that must have an audit regardless of size. A list can be found on the GOV.UK website <a href=\"https:\/\/www.gov.uk\/audit-exemptions-for-private-limited-companies\">here<\/a>.<\/p>\n<p>It is worth also bearing in mind that, if the parent company prepares consolidated audited accounts that include the subsidiary, the subsidiary may be exempt from audit if the parent guarantees its liabilities. Since leaving the EU, this guarantee is now only available to UK groups.<\/p>\n<h5>Benefits of audit to UK subsidiaries<\/h5>\n<p>Beyond compliance, and good governance, there are a number of other benefits that subsidiaries can reap from an audit.<\/p>\n<ol>\n<li>Accuracy and reliability of financial statements \u2013 a good audit provides an independent and objective assessment of a company\u2019s financial statements. The auditor will present a report that details whether the information reviewed is a fair and accurate reflection of the organisations financial position. This is vital if you are to inspire confidence amongst shareholders, investors, lenders and other stakeholders.<\/li>\n<li>Identifying and mitigating risk \u2013 an audit can help to uncover operational inefficiencies, weaknesses in controls and processes, and risks associated with fraudulent activity. Based on findings, management have the opportunity to make improvements in order to protect their assets.<\/li>\n<li>Align with parent company \u2013 parent companies will often have their own audit policies and guidelines to follow, but by also undergoing an audit you show willingness to align with their expectations and to take a cooperative and consistent approach to governance and transparency.<\/li>\n<\/ol>\n<h5>Our approach to audit and assurance<\/h5>\n<p>If you are a UK subsidiary needing an audit, the first step is to appoint a statutory auditor. This does not have to be the same auditor that your parent company uses.<\/p>\n<p>Most auditors will follow a similar process, in order to deliver the final report that is shared with Companies House, HM Revenue &amp; Customs (HMRC) and shareholders in the company.<\/p>\n<p>Our audit and assurance service is designed to help you grow your business whilst meeting the challenges of today\u2019s business environment.<\/p>\n<p>Regular and open communication underpins our robust approach to audit. Our objective is to deliver reliable, quality advisory and analytical input, to give you the confidence to make changes within, and decisions about, your business.<\/p>\n<p>If you are looking for auditors who will become a true extension of your own team, we would welcome the opportunity to discuss how we can support you. <a href=\"https:\/\/www.georgehay.co.uk\/contact-us\/\">Contact our audit team<\/a> in Hertfordshire, Bedfordshire or Cambridgeshire, today.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Many UK subsidiaries of overseas \u2018parent\u2019 companies are unaware that they may be required to have an audit. This is concerning given that so many international organisations use UK subsidiaries. This could be to scale up their operations or to<\/p>\n","protected":false},"author":8,"featured_media":5857,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[240,3,538,200,546,7,90,519,6,229,81,658,239,618,394,82,771,70,617,667,15,770,79,230,772,757],"tags":[31,884,883,882,811],"class_list":["post-5853","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-academies","category-accounting","category-audit","category-business","category-business-advisory","category-business-support","category-charities","category-construction","category-business-news","category-george-hay","category-hmrc","category-hospitality","category-industry-sectors","category-large-businesses","category-legal","category-legislation","category-professional","category-property","category-research-development","category-retail","category-richard-dilley","category-scientific","category-small-businesses","category-team-member","category-technical","category-travel","tag-audit","tag-audit-thresholds","tag-parent-companies","tag-uk-subsidiaries","tag-uk-tax"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>UK subsidiaries: Do you need an audit? 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