Why UK Subsidiaries Often Require An Audit

When it comes to running a subsidiary company in the UK, understanding the audit requirements is crucial. While some companies may qualify for audit exemption, many UK subsidiaries still find themselves needing an audit. Here’s why:-

• Legal Requirements

Under the Companies Act 2006, most UK companies are required to have their annual accounts audited unless they qualify for an exemption. For a subsidiary company, this often means meeting specific criteria related to size and financial thresholds.  A UK subsidiary must undergo an audit if it exceeds two or more of the following thresholds:

• • Annual turnover greater than £10.2 million

• • Total assets exceeding £5.1 million

• • More than 50 employees

• Group Audit Requirements

Even if a subsidiary qualifies for an exemption based on its size, it may still require an audit if it is part of a larger group. The group as a whole must meet the exemption criteria, which includes not being ineligible due to activities such as banking, insurance, or investment. This is a common reason as to why small UK Subsidiaries may require a full audit, as it forms part of a larger multinational or international group. In some circumstances, a parental guarantee may be an option.

• Shareholder Requests

If shareholders owning at least 10% of the shares request an audit, the company must comply, regardless of whether it meets the other exemption criteria.

• Regulatory and Compliance Needs

Certain industries, such as banking, insurance, and investment firms, have stricter regulatory requirements. Subsidiaries operating in these sectors must have their accounts audited to comply with industry-specific regulations.

Get In Touch

We have extensive experience in working with UK Subsidiaries and their audits. Should you wish to discuss this further, please contact your local Whitings LLP office and ask to speak to one of our Audit specialists.