Small Firms

Deputy Prime Minister written question – answered on 30th March 2006.

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Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

To ask the Deputy Prime Minister what definition the Department uses of a small firm.

Photo of Yvette Cooper Yvette Cooper Minister of State (Office of the Deputy Prime Minister) (Housing and Planning)

There is no single definition of a small firm and terms such as small firm" and SME" (Small and Medium sized Enterprise) are used interchangeably. Two of the most common definitions are those provided by the European Union and the Companies Act 1985.

The European Commission definition specifies a maximum headcount, turnover, balance sheet and independence criteria to qualify as a small firm.

The Companies Act 1985 states that a company is 'small' if it satisfies at least two of the following criteria: a turnover of not more than £5.6 million; a balance sheet total of not more than £2.8 million; and not more than 50 employees.

Use of the European Commission definition is voluntary and the Companies Act 1985 definition determines the eligibility of small firms for certain accounting and auditing exemptions and is not applied universally.

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