Audit Exemption Rules Changed For Small & Micro Companies In Ireland

A new legal provision came into effect in July 2025 that impacts the audit exemption regime for small and micro companies in Ireland. This welcome change means that a one-off late annual return (AR) filing in any five-year period will no longer mean such businesses are obliged to have their financial statements audited for the following two years.

Who is this change for?

This is an overdue change, as insisting on an audit is an excessive penalty that brings no value to the business. The government has recognised the disproportionate financial impact of the audit requirement on smaller business. The new clause, Section 22 of the Companies (Corporate Governance, Enforcement and Regulatory Provisions) Act 2024, provides for a change to the current regime for:

• Companies that meet the legal definition of small or micro companies under the Companies Act, and
• Companies that are not part of a group that files consolidated accounts.

The statutory thresholds for micro and small sized companies are that they must meet at least two of three size criteria in the current and previous financial year:

• Small company: turnover ≤ €15 million; balance sheet total ≤ €7.5 million; and average number of employees ≤ 50.
• Micro company: turnover ≤ €900,000; balance sheet total ≤ €450,000; and average number of employees ≤ 10.

What does this change look like in practice?

For companies qualifying as small or micro and not part of a group, a single late annual return to Companies Registration Office (CRO) would previously have meant paying for the unplanned and potentially sizeable cost of two years of audits. Audits must be carried out by a statutory auditor who is authorised by a recognised accountancy body (like Chartered Accountants Ireland, ACCA, or CPA Ireland). Market changes in recent years have seen the number of smaller audit firms decline while audit fees have escalated.

Before this change, a company could apply to the District Court to have their exemption restored for that year. The court could grant the order if the company proved that the late filing was due to exceptional circumstances (typically something outside the company’s control like illness, a postal strike, system failure, etc.), and that it had acted honestly and responsibly in trying to comply. The new rule gives you one ‘free pass’ in a rolling five-year window, reducing the chance that an administrative oversight will cost you your exemption.

What if there has already been a late filing?

The new rule started on 16th July 2025, so any late filings from before that date no longer count towards the new ‘two strikes in five years’ test. Everyone starts with a clean record from that date.

If your first late filing happens on or after 16th July 2025, it’s just your first strike. You only lose the audit exemption if you file late again within the next five years. But if you filed late up to and including 15th July 2025, the old, harsher rule still applies. One late filing automatically means you lose audit exemption for the next two years.

Can companies still seek an exemption from the District Court?

Just as they could in the past, companies may still apply to the District Court for an extension to file a late annual return and to retain their audit exemption if the company was entitled to claim the exemption for that late annual return. 

These new provisions do not apply to companies that are part of a group and file consolidated accounts. If one or more companies in a group is late filing, the audit exemption for the group can only be granted by the District Court. Otherwise, all companies in the group must submit audited accounts for the next two years.

Have late filing fees also been abolished?

This provisions only concerns your audit exemption. Companies will still be liable to pay penalties for the late filing of their annual return. A late filing fee of €100 becomes due on the day after the annual return filing deadline (56 days after the annual return date (ARD)), with a daily penalty of €3 incurred for every subsequent day that the filling is late, up to a maximum late fee of €1,200 per return.

There are thousands of companies that haven’t made returns for a number of years. In the past, CRO dropped an average of 11,000 companies from the register each year for non-compliance. In recent years, there seems to have been less enforcement – companies have just been left on the register as non-compliant. It will be interesting to see what their approach is in light of this change and if it affects how they enforce fines or the number of companies that face involuntary strike-off.

Filing on time doesn’t just save money, it ensures a clean compliance history with CRO. Remember that the consequences of being struck off can include asset seizure, loss of the limited liability protection (making you personally liable) if you continue to trade, no access to lending, and disqualification of directors.

What should you do right now?

Filling your annual return late will no longer be a catastrophe, but that doesn’t mean you should see filing deadlines as optional – a second late filing will still cost you your audit exemption. Audit fees start at around €1,800 for smaller companies and go up from there (and you’ll need to be audited over two years).

We recommend the following checks:

1. Review the size criteria to know if your company qualifies as micro or small (ask your accountant if unsure).
2. Check the company’s annual return history to see if there are previous late filings in the past five years (bearing in mind the transition date is 16th July 2025).
3. If you’ve been late recently (on or before 15th July 2025), assume the old rule may apply and speak to your accountant immediately.
4. If you were planning to file late for operational reasons, remember that a second late filing within five years will trigger audits. Speak to your accountant to see how this could be avoided.
5. Create a plan with your accountant to prepare and file your annual returns as soon as your financial year is over. Agree responsibilities and deadlines with them and then stick to the schedule. The bonus? The earlier you do your accounts, the sooner you have clarity on your tax obligations and can start planning for their payment later that year.

I think that accountants originally welcomed the obligation to have company accounts audited because it brought in extra business. However, the regulatory landscape we’re in now means that these types of audits are a lot of work – especially in the first year when you have to set everything up – for not very much return. They never took this approach in the UK and it wasn’t necessary here in Ireland, so this is a positive change for smaller businesses.

At Beyond, our Outsourced Accounting service is based on using the four cycles to proactively manage our clients’ finances. If you’d like to know more, get in touch today.

Rory