Setting up a business in the UK involves a myriad of considerations, particularly when it comes to audit requirements and staying compliant with UK regulations.

In some countries it is an unfamiliar concept of statutory transparency to the intricacies of audit criteria and post-Brexit regulatory changes, businesses, especially those transitioning from the U.S., need to navigate these nuances.

When setting up a business in the UK, you will need to look at the best approach to establish your business from an accounting perspective, which could differ considerably from your experience in setting up domestically. While your business may not be required to complete an audit at this time, it’s imperative to stay on top of regulations and requirements to ensure your business remains compliant as it operates in the UK.

With that in mind we have set out below some pointers for audit considerations for businesses looking to expand into or set up in the UK, and how these could impact your organisation:

Statutory accounts and reporting requirements

For many US companies specifically, the idea of publicly available statutory accounts can be quite alien. In the UK, however, businesses are predominantly transparent with their financial data. This openness starkly contrasts with the US and other countries’ regulations, where many businesses, particularly small ones, may not be accustomed to the regulatory necessity of public financial disclosures.

UK audit criteria

The initial test to determine whether your UK company needs an audit is to check whether the group that it is part of has exceeded two out of three of the criteria listed below in the last two consecutive years:

1. £10.2 million turnover

2. £5.1 million in gross assets

3. 50+ employees

In many cases, the UK subsidiary will need to be audited but not its overseas parent entity. It may also still be able to prepare accounts under the small company regime. There are a number of other criteria where an audit may be mandatory even if the group is under the limits shown above, such as, if the company is carrying out insurance or banking services, regulated by the FCA (Financial Conduct Authority), or has a UK publicly traded company in the group.

Building credibility through audit

An important aspect to consider alongside regulations and requirements is that audits ultimately build credibility. For companies that are eyeing growth for a potential sale in the future, voluntary audits can be a strategic move. Regardless of obligation, a voluntary audit can enhance a business’ credibility, making it more attractive to potential buyers during the due diligence stage. Additionally, we are expecting the audit exemption criteria to increase significantly starting in 2025, which could impact the decision to pursue voluntary audits.

How we can help

At Buzzacott, we understand there are various considerations to account for, and tailor our services to suit your business. Whether you are a fast-growth start-up, an intergenerational family business, a professional practice, or an international group of companies. If you're looking to set up a business or expand into the UK and need to consider what regulatory requirements might apply to you, our specialist team can guide you through the process.