Private limited companies in the UK have to prepare a set of accounts each year.
Known as annual statutory accounts, they relate to the 12-month period ending on the company’s Accounting reference date (ARD). The ARD is the compamy’s official year-end as recorded with Companies House.
The annual accounts are drawn up using financial records from the relevant accounting period, and will determine how much corporation tax the company is liable to pay.
In this guide, we answer essential information to help you prepare limited company accounts and avoid falling foul of penalties for non-compliance.
What are statutory company accounts?
Under the Companies act 2016, private limited companies must produce a set of year-end accounts. Company directors have duties under law to ensure the accurate maintenance of the limited company accounts.
Company accounts are a public record, allowing external scrutiny of a company’s financial activity and performance.
The final accounts are to be submitted to Companies House, to HMRC as part of your annual tax return, to company shareholders and those permitted to attend the company’s AGM.
When is the deadline for filing annual accounts?
Accounts must be filed within a specific timeframe following the accounting period, or financial penalties may be incurred. Note that while both your tax return and statutory accounts may be submitted simultaneously, the deadline for filing with Companies House and HMRC are different.
Different deadlines apply for submitting the annual accounts and tax return, but companies may opt to file at the same time.
Statutory accounts in most cases have to be filed at Companies House 9 months after the year-end.
The corporation tax payment deadline is 9 months and one day after the year end. The corporation tax return (CT600) is then due 12 months after the year-end.
Failure to meet the relevant deadline can result in financial penalties.
How to prepare your company’s limited accounts
To prepare your statutory accounts correctly it is essential that you practice sound financial record keeping throughout the year.
To prepare your accounts, you will need the following information:
- Details of all assets held by the company
- All the money that has been spent or received by the business within the accounting period
- Details of any debts the company is owed, or owes to other organisations
- An inventory listing all stock owned by the company at the end of the financial year
- A list of all stock purchased or sold by the company within the financial year
- Details of who these goods were sold to or purchased from (this does not apply to retail trade)
Using this information, you can prepare and finalise your limited company accounts for filing. The process will be relatively straight-forward if you have kept on top of your financial records throughout the year.
The accounts have to follow a format the prescribed format in accordance with Financial Reporting Standards 102.
Statutory accounts have to include:
- Statement of Financial Position (‘balance sheet’) – detailing all company assets, liabilities and what the company is owed at the end of the reporting period on the last day of the financial year (ARD). This document must be signed by a company director.
- Statement of Income and Retained Earnings (‘profit and loss account’) – showing compay sales, operating costs and the profit or loss made during the reporting period. Note that accounts submitted to Companies House do not contain the Statement of Income and Retained Earnings.
- Notes to the accounts
- Director’s report except for microentities
- An auditor’s report, if applicable
Accurately tracking expenses is one of the most important steps you can take when preparing your statutory accounts and tax return, especially where the latter is concerned. Remember that every pound spent ‘wholly and exclusively” on the business can be deducted from your annual profits and will reduce the amount of corporation tax you are liable to pay.
Keep in mind that you must be able to back up all your allowable expenses with receipts; if you do not have the paperwork to evidence the purchase, it cannot be included as an expense on your tax return.
How to file your accounts
Prior to filing your limited company accounts, you must register the business with Companies House to receive a unique authentication code.
As private limited companies do not need to be audited, you can use Company Accounts and Tax Online (CATO) to file your HMRC tax return and Companies House accounts at the same time.
Online filing options are available to most types of limited company; you will be able to submit your statutory accounts to Companies House online if you are filing micro-entity, abridged or dormant accounts. In most cases, the deadline for submitting your accounts is nine months after the accounting period has ended.
What if you do not file your limited company accounts?
Failing to submit your statutory accounts to Companies House could incur financial penalties of £150 to £1,500. In addition to fines, companies who do not submit their accounts risk the far more serious consequence of being struck from the Companies House register.
If the registrar believes the company is no longer in business and removes it from the list, all the company’s assets would become the property of the Crown.
Filing your tax return late with HMRC will also incur fines, which could range from £100 to 10% of any tax you owe. Note too that these fines will increase with consecutive late returns.
Limited company accounts for smaller businesses
If your company is small, considered a ‘micro-entity’ or is dormant, reduced disclosure requirement apply under FRS 102 Section 1A.
To be classed as a small business, two of the following must be applicable:
- The company’s turnover is £10.2 million or less
- The company’s balance sheet details £5.1 million or less
- The company has 50 or fewer employees
Instead, you need only submit an abridged version which summarises key information and will not be subject to audit.
However, all limited companies must still submit their complete statutory accounts to HMRC as part of their yearly tax return.
Further to being permitted to submit abridged limited company accounts, small businesses can opt not to send a copy of the director’s report and details of profits and losses to Companies House.
Micro-entities are even smaller than ‘small’ companies and as such, are only required to submit simplified accounts and may include less detail on their yearly balance sheets.
Your company is considered a micro-entity when at least two of the below points apply:
- The company has a turnover of £632,000 or less
- The company’s balance sheet details £316,000 or less
- The company has ten or fewer employees
Your company is considered ‘dormant’ if you have no significant transactions to report to Companies House within the financial year.
Note that the following transactions are not significant irrespective of their amount:
- Companies House filing fees
- Late filing penalties
- Shares paid for when the company was incorporated
If you company is dormant you may also be exempt from paying corporation tax to HMRC. Though keep in mind that this is not necessarily the case, so it would be wise to confirm with HMRC if you think the company may qualify as dormant.
Can you prepare your own limited company accounts?
Depending on how complex your financial activity, and how experienced and confident you are in meeting the requirements, most companies opt to use a professional to help with preparing and filing company accounts.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute tax, financial or legal advice, nor is it a complete or authoritative statement of the rules and should not be treated as such.
Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission.
Before acting on any of the information contained herein, expert tax, financial, legal or other advice should be sought.