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 as a small company and can claim audit exemption. Under the Companies Act, a small company is one that meets two of the three threshold tests (or two of the following: turnover below 10.2 million pounds, balance sheet total below 5.1 million pounds, and fewer than 50 employees).
But many UK subsidiaries that are small companies can’t claim the exemption because of their group membership. The key rule: a subsidiary company is only exempt if the worldwide group it belongs to also qualifies as small. If the group exceeds the small group thresholds – turnover above 10.2 million pounds net (12.2 million gross), balance sheet above 5.1 million net (6.1 million gross), or more than 50 employees on a consolidated basis – then every subsidiary within the group needs an audit, regardless of its own size.
There are exceptions. If the parent company is established in the EEA and provides a guarantee under section 479A, the UK subsidiary may be exempt from audit even within a large group. But this requires the parent to consolidate the subsidiary’s results and file the guarantee at Companies House for each financial year.
New thresholds from 6 April 2025
The small company audit threshold is changing. From 6 April 2025 (for financial years starting on or after that date), the turnover threshold rises to 15 million pounds and the balance sheet threshold rises to 7.5 million pounds. This means some UK subsidiaries that currently require an audit may qualify for audit exemption under the new limits.
If your UK company currently falls just above the existing threshold, the changes could remove the audit requirement. But remember: the worldwide group must also meet two of the following revised thresholds on a consolidated basis for the subsidiary to claim exemption. Companies require careful analysis of both entity-level and group-level numbers before concluding that an audit is no longer needed.
Companies that can never claim exemption
Certain types of company always require an audit regardless of size. These include any company whose securities are traded on a UK regulated market, any company that is an authorised insurance company or carries on insurance market activity, and any UCITS management company. Banking companies and MiFID investment firms are also excluded from the small company exemption.
If your UK subsidiary falls into any of these categories, the size threshold is irrelevant – the company needs an audit every year.
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.
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.
