The financial year is coming to an end, which means it’s time to prepare your financial accounts and tax return. All limited and unlimited companies, whether or not they are trading, must keep adequate accounting records which means preparing annual accounts and reports under Part 15 of the Companies Act 2006 (CA 2006). This article will explain what year end accounts are what your obligations are as a director or owner of a small business.
What are limited company accounts?
The statutory accounts a small business must prepare and submit to Companies House each financial year are:
- a ‘balance sheet’, which shows the value of everything the company owns, owes and is owed on the last day of the financial year
- a ‘profit and loss account’, which shows the company’s sales, running costs and the profit or loss it has made over the financial year
- notes about the accounts
- a director’s report (unless the business is classified as a ‘micro-entity’)
Unless it is specified in the company's articles of association, companies are exempt from an audit if they have an annual turnover of no more than £10.2 millions, assets worth no more than £5.1 million and 50 or fewer employees on average.
The size of your company will determine additional accounting requirements or exemptions. Your businesses will qualify as a micro-entity, small company or medium-sized business depending on its turnover, balance sheet and average number of employees.
When submitting accounts, the balance sheet must have the name of a company director printed on it and be signed by the director. Directors must approve and sign the annual accounts of a company and are primarily responsible for their accuracy. Companies House accepts both wet-ink and electronic signatures.
The statutory accounts must meet the accounting standards of either the International Financial Reporting Standards or the New UK Generally Accepted Accounting Practice. Limited companies must submit their Company Tax Return at the same time as they submit their accounts. If you need help preparing your accounts you can appoint an agent who can also file your Company Tax Return.
When does a company's accounting year end?
Each company will have a different accounting reference date and accounting period for corporation tax purposes but it can’t be longer than 12 months and is normally the same as the financial year covered by the company's annual accounts.
Accounting periods can be shorter than 12 months for example when setting up a new business.
For example, a company's first financial year:
- Begins with the first day of its first accounting reference period.
- Ends with the last day of that period or such other date, not more than seven days before or after the end of that period, as the directors may determine.
Subsequent financial years:
- Begin with the day immediately following the end of the company's previous financial year.
- End with the last day of its next accounting reference period or such other date, not more than seven days before or after the end of that period, as the directors may determine.
When do annual accounts need to be submitted to Companies House?
The end of your company's tax year will determine when you need to submit your accounts and tax return. The filing deadline of annual accounts to Companies House is 9 months from the accounting reference date and the filing deadline for your tax return is 12 months after the end of the accounting period the return covers.
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What accounting records are used to prepare the annual accounts?
Accounting records must contain entries from day to day of all sums of money received and expended by the company with a record of all the company's assets and liabilities. The accounting records must be evidenced with receipts and invoices and must also contain, if applicable, statements of stock held, statements of stocktakings and statements of goods sold and purchased. These financial records will be used to prepare your annual accounts as well as your business' Company Tax Return. Using accounting software during your financial year will make the bookkeeping process of collecting evidence, recording transactions, bank statements and preparing financial reports much easier.
How to submit your accounts and tax return to Companies House?
Companies House and HMRC have a service to submit your annual accounts and corporation tax return online. It is possible to file these documents offline but only if you have a reasonable excuse.
What happens after submitting your accounts and tax return?
After submitting your accounts and tax return online, both Companies House and HMRC will review your documents to ensure they are correct. Your business will then need to pay its corporation tax, usually within 9 months of submitting the return. If your business has made a loss due to research and development, it may be able to claim an R&D tax credit from HMRC which can be in the form of a lump sum payment or offset against future profits.
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The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.