What are a company’s annual accounts?
Nearly all registered companies in the UK must annually prepare accounts for submission to Companies House and HMRC. These reports detail the company’s financial activities and determine its Corporation Tax obligations to HMRC.
Directors are legally responsible for the accurate preparation and timely filing of financial statements by the statutory filing deadline. Copies must also be provided to the company’s shareholders or guarantors (members).
Different types of limited company accounts
Except for ‘small’ companies, micro-entities, and dormant companies, all businesses must submit full annual accounts (known as ‘statutory accounts’) to both Companies House and HMRC. These accounts include:
- a profit and loss account
- a balance sheet
- notes about the accounts
- a directors’ report
- an auditors’ report (unless the company qualifies for exemption)
- name and signature of the company director
Small company accounts
Small companies can submit simplified annual accounts to Companies House, comprising a balance sheet and accompanying notes.To qualify, your company must meet at least two of the following conditions:
- annual turnover below £10.2m
- a balance sheet total less than £5.1m
- fewer than 50 employees
Although small company accounts are not required to undergo audit, an auditors’ report is not necessary. However, statutory accounts must still be provided to members and prepared for HMRC as part of the Company Tax Return.
Micro-entity accounts
Very small companies can prepare for micro-entity accounts, which have fewer requirements than small company accounts. To qualify as a micro-entity, your company must meet at least two of the following conditions:
- annual turnover below £632,000
- a balance sheet total of less than £316,000
- fewer than 10 employees
Micro entities are still required to submit statutory accounts to company members and to HMRC as part of their Company Tax Return.
Dormant company accounts
Dormant companies only need to prepare dormant accounts, consisting of a balance sheet and accompanying notes. They are not required to submit these to HMRC, but must inform HMRC that the company is dormant for Corporation Tax purposes.
When and how should annual accounts be delivered to Companies House and HMRC?
Your first accounts must be filed with Companies House within 21 months of incorporation. These typically cover just over 12 months from the date of incorporation to the Accounting Reference Date (ARD), usually the anniversary of the last day of the month of incorporation.
After the first year, a company’s accounts for Companies House typically cover a 12-month period and must be submitted no later than 9 months after the accounting reference date (ARD).
You can submit annual accounts to Companies House using the WebFiling service or through Startxpress. For assistance, contact us at support@startxpress.io. We are here to help you at every step.
Complete annual accounts for HMRC must accompany each Company Tax Return and be filed online no later than 12 months after the end of each Corporation Tax accounting period.
What is the accounting reference date (ARD) for my company?
When registered at Companies House, all companies are assigned an accounting reference date (ARD), marking the end of the company’s financial year.
For instance, the first ARD for a company typically falls on the anniversary of the last day of the month in which it was incorporated.
- You register a company on 1 July 2024
- Your first ARD will be 31 July 2025
- Annual accounts must be ‘made up’ to this accounting reference date and filed at Companies House no later than 9 months after the ARD
- The ARD will remain the same every year unless you shorten or extend your financial year
Can I change my accounting reference date?
You can change your accounting reference date at any time before the filing deadline, except if your accounts are overdue or the company is in administration.
You have the flexibility to shorten your 12-month financial year by any number of months as frequently as needed. However, you can only extend your financial year once every 5 years, up to 18 months from the date of incorporation or the previous year’s ARD. To change your company’s ARD, the director must complete and submit Companies House Form AA01 (formerly Form 225). This straightforward process takes only minutes and can be done online via Companies House WebFiling or Startxpress Company Operating System. The new ARD will become the deadline for all subsequent annual accounts, unless further changes to the financial year are made.
Notifying HMRC of a change of ARD
If you change your ARD, it will impact your Corporation Tax accounting period, so you must promptly notify HMRC of any changes.
Accounting periods can be shorter than 12 months. However, unlike your company’s financial year, they cannot exceed 12 months.
If you extend your financial year beyond 12 months, you will need to file two Company Tax Returns: one for the initial 12 months and another for the additional weeks or months.
Can I prepare my own company accounts?
Accounting and taxation requirements for limited companies are significantly more intricate compared to those for sole traders. These companies manage larger-scale accounts and must comply with rigorous accounting standards and practices set by the Financial Reporting Council (FRC).
As a director, you have legal obligations that include maintaining precise accounting records, submitting accurate annual accounts to both Companies House and HMRC, calculating your business’s tax liabilities, filing Company Tax Returns, and preparing your own Self Assessment tax returns.
Your ability to meet these obligations will depend on your understanding of bookkeeping and accounting, as well as the complexity of your financial affairs. If you don’t feel equipped to handle these responsibilities, you may want to hire a bookkeeper.
While there are costs involved, the fees paid to an accountant may be justified by the time saved. In addition, an accountant can recommend strategies to reduce tax liabilities and promote business growth.
Can Startxpress help me?
Yes, Startxpress can assist you with various aspects of managing your company’s accounting and compliance needs. Whether you need help with preparing and filing annual accounts, changing your accounting reference date (ARD), or understanding your tax obligations, Startxpress provides expert guidance and support.
For personalized assistance with your company’s accounting and compliance needs, contact Startxpress at support@startxpress.io. We are here to assist you at every step and ensure your company meets its regulatory requirements effectively and efficiently.
When are limited company accounts audited?
Audits can be time-consuming and costly as they involve a comprehensive stocktake and detailed review of all accounting records, including bank accounts.
Most small to medium-sized companies will not need an audit unless:
- their articles of association explicitly state that an audit should be carried out
- an audit request is made by shareholders who own at least 10% of the company’s issued shares
An audit must be conducted by an independent, authorized accountant. Even if your company qualifies for exemption, an audit can be highly beneficial. It allows you to assess your company’s financial health and provides assurance to lenders and investors about its viability and profitability.
What is a profit and loss account?
A profit and loss account, also known as a profit and loss statement, is a key component of full financial accounts.
This statement illustrates the financial performance of the business throughout the fiscal year, detailing revenues from sales, operating expenses associated with generating those revenues, and the resulting profit or loss.
This data allows shareholders and directors to assess the business’s performance and is crucial for HMRC in determining the company’s tax liability.
What is a balance sheet?
A balance sheet is another essential component of full financial accounts. It presents a snapshot of a company’s assets and liabilities (what it owns and owes) and provides an overall valuation of the business as of the specific date when the balance sheet was prepared.
What is the difference between annual accounts and annual confirmation statements?
Annual accounts document a company’s financial activities annually for submission to Companies House and HMRC.
Annual confirmation statements, required annually by Companies House, verify and update essential company details on a specified date, including:
- Registered office address
- SAIL address
- Directors’ details
- Secretary details
- Shareholders’ or guarantors’ details
- Share capital
- Nature of business activities
- People with significant control (PSCs) of the company
- Company’s registered email address
The information that can be updated on the confirmation statement includes details of shares and shareholders, Standard Industrial Classification (SIC) codes, and exemption from maintaining a PSC register. Any other changes must be reported to Companies House separately, either before or at the same time as submitting the confirmation statement.
For further insights, explore the Startxpress Help Center and Blog. If you have questions or need support, reach out anytime at support@startxpress.io!
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