SECR thresholds: exceed two of three

SECR applies to three kinds of organisation, and each finds its threshold in a different place.

Quoted companies are caught because they are quoted: paragraph 15(1) applies Part 7 “if the company is a quoted company”, with no turnover, balance sheet or headcount test.

A quoted company is one whose equity share capital is on the Official List, officially listed in an EEA State, or admitted to dealing on the New York Stock Exchange or Nasdaq, under section 385 of the Companies Act 2006.

The London Stock Exchange says in its own Admission and Disclosure Standards that securities admitted to AIM are not admitted to the Official List.

So an AIM company is unquoted for SECR, faces the size test, and if it is in scope reports on the unquoted basis.

Unquoted companies are tested under Part 7A, and LLPs under their own instrument with the same figures.

Which organisations are exempt, and which reliefs apply once you are in, is set out on SECR eligibility.

The consecutive-year rule sits in paragraph 20B(1), and it works in both directions.

In a company’s first financial year, the exemption depends on that year alone.

After that, a company is exempt if it meets the conditions this year and met them last year.

It is also exempt if it meets them this year and was exempt last year.

And it stays exempt in a year it exceeds the limits, if it met the conditions and was exempt the year before.

So a growing company comes into scope in its second consecutive year over the limits, not the first.

A shrinking company that was in scope leaves only after two consecutive years under them.

The LLP test carries the same three-limb rule in modified section 415A(1).

The test is applied to the financial year as a whole, so crossing a limit part-way through a year changes nothing until the year’s figures are known.

A parent company is not tested on its own figures but on the group it heads, under paragraph 20C of Part 7A.

The aggregate figures are built by adding up each group member’s figures, determined as paragraph 20B determines them.

“Net” means after the set-offs that eliminate group transactions, “gross” means before them, and a group may satisfy each limb on either basis.

Each subsidiary’s figures come from its own accounts for the year ending with the parent’s, or its last year ending before it.

The same consecutive-year rule applies to the group, in paragraph 20C(1).

A subsidiary that is in scope on its own figures need not report itself if paragraph 20A(2) applies.

That needs the subsidiary to be included in the group report of a parent whose financial year ends at the same time as or before its own, and the group report to comply.

The shelter fails where the group report relies on the seriously prejudicial relief.

The DESNZ evaluation found that most in-scope entities, about 14,000 of 19,900, must report themselves and cannot rely on a parent’s disclosure.

The checker applies paragraphs 15, 20A, 20B and 20C and regulation 12B as written, including the consecutive-year rule.

Enter the figures from this year’s accounts and last year’s, and say whether the company reported last year.

It does not deal with the 40,000 kWh relief, because that relief does not take anyone out of scope: an in-scope company that consumed 40,000 kWh or less may withhold the figures only if its report says so.

The 2018 impact assessment behind the government’s SECR consultation forecast about 11,300 organisations in scope, and the 2026 evaluation found about 19,900.

Close to a limit, record the calculation each year: it is the first thing an auditor or reviewer will ask for.

Our complete SECR guide puts the thresholds in context, and you can book a free 15-minute call to talk a borderline case through.