We all often hear talk of “SMEs” and “small” and “medium” sized businesses, but what’s the definition of small or medium sized business, and how do you actually define the size of a business?
A business’s size can be measured in a number of ways. Firstly, by the number of employees that work for it or by total sales within a defined period, but no one specific line exists that separates a small business from a medium business. Much of this is still open to interpretation.
So what’s the definition of small or medium sized business?
In March 2015 the Department for Business Innovation ans Skills (BIS) approved The Companies, Partnership and Groups (Accounts and Reports) Regulations 2015 (the “new regulations”) which implement the requirements of a new EU Accounting Directive into UK company law. This resulted in the following revised definitions of accounting thresholds:
What is a small business?
A small business is defined as a company that does not exceed at least 2 out of 3 of the following criteria in the current and preceding year :
- Balance sheet total : £5.1m
- Small business income : £10.2m
- Average employees for small business during the financial year : 50
What is a medium sized business?
A medium sized business is defined as a company that not exceed at least 2 out of 3 of the following criteria in the current and preceding year :
- Balance sheet total : £18m
- Medium business income : £36m
- Average employees for medium business during the financial year : 250
However, it can be confusing! The Oxford dictionary describes an SME as “Small to medium-sized enterprise, a company with no more than 500 employees”.
Whilst according to the Government website www.gov.uk a qualifying SME for the purposes of R&D tax credits is “a company with fewer than 250 employees and either annual turnover not exceeding 40 million euros, or balance sheet total not exceeding 27 million euros!”
So, it is clear there are many different ways to measure the size of a business and this can be dependent on a number of factors.
Business advisory services for small or medium sized businesses.
If you need to know this for accounting/tax purposes it is always best to seek professional business advice. We have many years’ experience in helping business owners throughout the Yorkshire region. To find out how Haines Watts can support you in growing your business please contact our Leeds office on 0113 398 1100 or email firstname.lastname@example.org
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