Audit Group provides audit services for UK subsidiaries of foreign parent companies. Many overseas groups have UK companies that require an audit under the Companies Act – or need one to satisfy group consolidation requirements even when they’d otherwise qualify for exemption. We work with parent companies and group auditors worldwide to deliver what’s needed.
Does your UK subsidiary need an audit?
A company must have a statutory audit unless it qualifies for one of the exemptions in the Companies Act 2006. For most UK subsidiaries the relevant one is the small-company exemption under section 477. For financial years beginning on or after 6 April 2025, a company satisfies the small-company size criteria where it meets at least two of the three qualifying conditions: turnover not more than £15 million, balance sheet total not more than £7.5 million, and an average of not more than 50 employees. It doesn’t need to pass all three.
But many UK subsidiaries that are small on their own numbers can’t claim the exemption because of their group membership. Where a company is a group company, s.477 is subject to s.479: the group it belongs to must also qualify as a small group and must not be an ineligible group. For financial years beginning on or after 6 April 2025 a group is small where it meets at least two of the three group conditions – aggregate turnover not more than £15 million net (£18 million gross), aggregate balance sheet total not more than £7.5 million net (£9 million gross), and not more than 50 employees on an aggregate basis. The whole worldwide group counts, not just the UK companies in the chain. So a UK subsidiary may satisfy the individual small-company size tests but still be unable to claim the s.477 audit exemption because it is a member of a group that does not qualify as small or is an ineligible group. That is the usual reason a small UK subsidiary of a large overseas group needs a UK statutory audit.
There are other exemptions. Section 479A is a separate subsidiary audit exemption that doesn’t depend on the subsidiary being small, but for current financial years the parent undertaking giving the statutory guarantee must be established under the law of a part of the United Kingdom. Groups with a UK-established parent undertaking within their structure may be able to use it if all the conditions are met, including unanimous member agreement, a parent guarantee under s.479C, inclusion in that parent’s consolidated accounts and the required filings at Companies House for each financial year. Dormant subsidiaries have their own rules. Our UK subsidiary audit guide covers the s.479A conditions in detail.
Updated thresholds from 6 April 2025
The small company audit thresholds increased for financial years beginning on or after 6 April 2025. The change is driven by when the financial year begins, not by when the accounts are filed.
- Financial years beginning on or after 6 April 2025: turnover not more than £15 million; balance sheet total not more than £7.5 million; average employees not more than 50
- Financial years beginning from 1 January 2016 to 5 April 2025: turnover not more than £10.2 million; balance sheet total not more than £5.1 million; average employees not more than 50
The group thresholds above (£15 million net / £18 million gross turnover, £7.5 million net / £9 million gross balance sheet total, 50 employees) are likewise the figures for financial years beginning on or after 6 April 2025. Older financial years use the previous, lower group limits, so take care not to mix the two sets of figures when looking back at earlier years. A company satisfies the size criteria by meeting at least two of the three conditions, and for companies beyond their first financial year the two-year rule can affect when a change in size classification takes effect.
If your UK company previously sat just above the old thresholds, the increase could remove the audit requirement. But the worldwide group must also qualify as small, and not be ineligible, for the subsidiary to claim the s.477 exemption. Both entity-level and group-level numbers need careful analysis before concluding that an audit is no longer needed.
Companies that can never claim exemption
Certain types of company can’t use the small-company audit exemption regardless of size (s.478). These include public companies (whether or not their shares are traded), authorised insurance companies and companies carrying on insurance market activity, banking companies, e-money issuers, MiFID investment firms and UCITS management companies. A traded company or any of these regulated entities within the group also makes the whole group ineligible under s.384, so a small UK subsidiary in such a group can’t claim the s.477 exemption either.
If your UK subsidiary falls into any of these categories, the size thresholds are irrelevant and it will need an audit every year. Traded companies and the regulated categories above are also excluded from the s.479A subsidiary exemption under s.479B.
Working with group auditors
When a UK subsidiary is a component of a larger group audit, we follow ISA 600 (Special Considerations – Audits of Group Financial Statements). The group auditor sets the scope – specifying materiality levels, audit procedures to perform, and the reporting format they need. We carry out the work locally and report back. Where no UK statutory audit is required, we can still provide component audit work, specified procedures, group reporting packages or voluntary assurance to the standard the group auditor needs.
We’ve worked as component auditors for group firms in the US, Europe, Asia and the Middle East. The process works best when we agree timelines early. Group audit deadlines are usually tighter than UK statutory filing deadlines, so we build our timetable around the consolidation schedule.
Why choose Audit Group?
- ICAEW-registered – Recognised by group auditors worldwide
- Component audit experience – We work with Big 4 and mid-tier firms regularly
- Fixed fees – Agreed before the audit starts
- Responsive – We understand that group deadlines don’t wait. We work to your consolidation timetable.
If your UK subsidiary needs a local audit or you want to check whether exemption applies, get in touch. Send us the group structure, the year end and the approximate size of the group and the UK company, and we’ll tell you where you stand.
Can a UK subsidiary of a foreign parent claim audit exemption?
Yes, potentially – but being foreign-owned does not itself create an audit exemption. The first question is usually whether the UK company can use the small-company exemption under s.477. If it is a group company, the wider group must also satisfy the small-group and eligibility conditions under s.479 (for financial years beginning on or after 6 April 2025: at least two of aggregate turnover not more than £15 million net, aggregate balance sheet total not more than £7.5 million net, and not more than 50 employees, with no ineligible member). Consequently, a small UK subsidiary of a large overseas group will commonly be unable to rely on s.477 and will need a UK statutory audit.
A separate exemption exists under s.479A of the Companies Act 2006, but for current financial years the parent undertaking that gives the statutory guarantee must be established under the law of a part of the United Kingdom. An overseas or EEA-based parent does not qualify merely because it owns the UK company or consolidates it into audited group accounts. The pre-Brexit wording that referred to EEA parents no longer applies. Groups with a UK parent undertaking within their structure should take specific advice, because s.479A may still be available if all the statutory conditions are satisfied and the guarantee, members’ agreement and consolidated accounts are filed at Companies House for each financial year. We can review your group structure and tell you which exemption (if any) actually applies before you commit to an audit cost.
Related reading: see our guide to the UK subsidiary audit for the full exemption rules.
