ESOS qualification — the test
and the word everyone gets wrong
250 employees, or turnover over £44m and balance sheet over £38m. That second “and” is conjunctive — and publishing it as “or” puts companies in scope that are not.
You are a large undertaking if either limb is met
Schedule 1 paragraph 1(a) of SI 2014/1643, which is the whole test.
An undertaking is a large undertaking if it—
(a) employs at least 250 persons, OR
(b) has an annual turnover exceeding amount A AND an annual balance sheet total exceeding amount B.
Amount A = £44 million. Amount B = £38 million. (Schedule 1 paragraph 1A, inserted by SI 2018/1342, binding from 31 December 2020.)
Two limbs, joined by or. Meeting either makes you a large undertaking. But within the second limb, the two financial tests are joined by and — you need both.
So there are exactly three ways to be in scope, and one common way to think you are when you are not:
You qualify. Turnover and balance sheet are irrelevant — you do not need to look at them at all.
You qualify on the financial limb.
Regulation 15 pulls in small and medium group undertakings of a large one. Groups →
You do not qualify. One financial threshold is not enough. This is the case the market publishes wrongly, and it is the most common false positive.
Photo: Unsplash / Nikola Jovanović“And” is doing a great deal of work here
Search for the ESOS thresholds and you will find the financial limb published as “turnover over £44m or balance sheet over £38m” on UK advisory sites.
That is not what Schedule 1 says, and the difference is not academic. A company with £50m turnover and a £20m balance sheet — a perfectly ordinary shape for a services business carrying little on its books — is out of scope under the real test and in scope under the misprinted one.
Which means the error costs money in the direction nobody audits for. Being wrongly told you are exempt gets discovered by a regulator. Being wrongly told you are in scope gets discovered by nobody, and you pay for a lead assessor you never needed.
There is a reason the mistake is so easy to make: the Companies Act 2006 size tests, and the SECR thresholds that most people meet first, use a two-out-of-three structure — employees, turnover, balance sheet, any two. ESOS does not. It uses one-or-both-of-two, with a different shape entirely. Anyone carrying the Companies Act structure across in their head will land on “or”.
And when a checker is written from that assumption, it produces confident wrong answers that pass every test its author thought to write — which is why the calculator below is driven, in our build harness, through the specific case of turnover over £44m, balance sheet under £38m, asserting it must not qualify.
Check your own figures
Applying Schedule 1 paragraph 1(a) exactly. Nothing leaves your browser.
A guide, not a determination. Group structures, overseas parents, the insolvency exclusion and the public-body exclusion all change the answer, and the figures must be the ones true on the qualification date — not today’s.
One day decides it, and it has already passed for Phase 4
Qualification is a snapshot, not an average.
Regulation 4(3)(b) sets the qualification date as the 31 December immediately preceding that phase’s compliance date. Your size on that single day decides whether the phase applies to you — not your size when the period opened, not your average across it, and not your size when the deadline arrives.
| Phase | Qualification date | Compliance date | Status |
|---|---|---|---|
| 4 | 31 December 2026 | 5 December 2027 | Already passed — settled |
| 5 | 31 December 2030 | 5 December 2031 | Ahead |
Two consequences worth planning around. Growing after the qualification date does not pull you in — if you were under the thresholds on 31 December 2026, Phase 4 does not apply however large you become before 2027. And shrinking after it does not let you out: if you qualified on that day, you comply, even if you have since fallen below every threshold.
Which makes the qualification date one of the few compliance dates worth diarising four years ahead. The full phase table →
Groups, parents and where the boundary falls
Regulation 15 is short and catches more than people expect.
An undertaking is a relevant undertaking if, on the qualification date, it is either a large undertaking, or a small or medium undertaking that is part of a group containing one. One qualifying member pulls the group in.
One qualifies, all participate
A small subsidiary of a large UK parent is a relevant undertaking in its own right, however small it is.
The UK part is what counts
Where the highest parent is outside the UK, the ESOS group is formed from the UK undertakings. A large overseas parent does not by itself bring a small UK subsidiary into scope.
Aggregate, then test
Groups usually comply together under a single responsible undertaking, with one notification covering the participants.
Insolvency, widened in 2026
Undertakings subject to insolvency proceedings at any point between the qualification date and the compliance date are excluded — extended by SI 2026/701 to group undertakings of an insolvent large undertaking where no solvent large undertaking remains.
Public bodies
ESOS applies to undertakings. Public bodies are outside it, though the boundary can be fine for bodies carrying on an economic activity.
Trusts and partnerships
“Undertaking” is broader than “company”. Partnerships and other bodies carrying on a trade or business can qualify.
Qualifying is not the same as needing a lead assessor
Three routes reduce or remove the assessment obligation without removing you from the scheme.
The lead assessor requirement does not apply. You still notify; you do not need the sign-off. This is the low-energy easement introduced in the 2023 reforms.
Where certification covers all of your total energy consumption, you are deemed to have complied with the lead assessor, audit and ESOS report duties. Partial coverage gives only a partial exemption — the uncovered consumption still needs auditing.
Inserted by SI 2026/701: participants with zero kWh total consumption are deemed to have complied with regulations 20, 21 and 21A(2)(b), Chapters 2A–4 of Part 4, and Part 6A.
Regulation 34 was omitted on 22 July 2026. Display Energy Certificates and Green Deal Assessments were compliance routes in earlier phases and are not now. What else changed →
Threshold claims that Schedule 1 does not support
Each checked against the revised instrument.
| Published claim | What Schedule 1 says |
|---|---|
| Turnover over £44m or balance sheet over £38m | And. Paragraph 1(a) makes the financial limb conjunctive. Published as “or”, it puts companies in scope that are not — and nobody ever audits a false positive. |
| Thresholds are €50m and €43m | Sterling since 31 December 2020 — £44m and £38m. The euro figures survive on the unrevised /schedule/1/made, which is the page a search result usually lands on. |
| You qualify on any two of three criteria | That is the Companies Act 2006 structure, not the ESOS one. ESOS is 250 staff, or both financial tests. Carrying the Companies Act shape across is how the “or” error starts. |
| SI 2026/701 changed the thresholds | It did not. Schedule 1 was untouched on 22 July 2026. SECR threshold alignment was consulted on and deferred — it is not law and has no date. |
ESOS qualification FAQs
Under Schedule 1 paragraph 1(a) of SI 2014/1643, an undertaking is large if it employs at least 250 persons, or if it has an annual turnover exceeding £44 million and an annual balance sheet total exceeding £38 million. The financial limb is conjunctive: both figures must be exceeded. A small or medium undertaking that is part of a group containing a large undertaking is also a relevant undertaking under regulation 15.
Both. Schedule 1 joins the two financial tests with “and”, so exceeding turnover of £44 million alone does not bring you into scope if your balance sheet total is £38 million or below. This is published incorrectly as “or” on many UK advisory sites, which produces false positives — companies paying for assessments they are not required to have.
For Phase 4 it was 31 December 2026; for Phase 5 it is 31 December 2030. Regulation 4(3)(b) sets it as the 31 December immediately preceding that phase's compliance date. It is a single-day snapshot: growing after it does not bring you into the phase, and shrinking after it does not take you out.
Usually, but not always. Regulation 21(3) disapplies the lead assessor requirement where total energy consumption is under 40,000 kWh. Regulation 33(2) deems compliance with the lead assessor, audit and report duties where ISO 50001 certification covers all of your total energy consumption — partial coverage gives only a partial exemption. New regulation 33A, inserted in July 2026, deems compliance for participants with zero consumption.
Not by itself. Where the highest parent undertaking is outside the UK, the ESOS group is formed from the UK undertakings, and the test is applied to that group. A large overseas parent does not automatically make a small UK subsidiary a relevant undertaking — but a large UK member of the same group does.
No. SI 2026/701 came into force on 22 July 2026 and made substantial changes to ESOS, but it left Schedule 1 untouched. The thresholds remain 250 employees, or £44 million turnover and £38 million balance sheet total. Alignment of ESOS thresholds with SECR was consulted on and deferred; it is not law and carries no date.
Primary sources
Every threshold and date on this page, opened and read on 14 August 2026.
The rest of the ESOS cluster
Phase 4 compliance
You qualified on 31 December 2026. This is what you owe by 5 December 2027.
DatesAll five ESOS phases
Every qualification and compliance date from 2014 to 2031, sourced to regulation 4.
The lawThe ESOS regulations
SI 2014/1643 and every amendment, and which regulation governs what.