Company annual accounts

Introduction

The Companies House annual company accounts are a set of financial statements. The accounts need preparing every year, for every limited company in the UK. A company’s financial accounts are effectively an annual summary of its finances. The primary reasons for preparing accounts are to:

  • Record your figures to the UK authorities -these are Companies House and HM Revenue & Customs (HMRC).
  • Report your results to your company’s shareholders.

Whether you are a contractor or small business owner, you will need to be aware about company annual accounts, once you have formed your company. However, these will not need preparing or filing until at least a year in the future.

In fact, there are two main documents that need filing with Companies House on an annual basis. Besides the annual accounts, the other document is a Confirmation Statement (this was formerly called the `Annual Return’).

Company directors have responsibilities when running a UK company and they also have certain director duties. One key task is to make sure that accounts are prepared for your company’s financial year once per annum. As a director, you are also legally responsible for making sure that you file the accounts with the UK authorities each year. It is also important to ensure that these are on time.

The size of company

When we prepare accounts in accordance with the Companies Act 2006 (CA 2006), there are four sizes of company to consider. The type of accounts to prepare depends on the size of the company and the four sizes of company are:

  • Micro-entity.
  • Small.
  • Medium-sized.
  • Large.

Your company will count as a micro-entity if it has at least two of the following:

  • A turnover of £632,000 or less.
  • £316,000 or less on its Balance Sheet.
  • 10 employees or less.

A company will count as small if it has at least two of the following:

  • A turnover of £10.2 million or less.
  • £5.1 million or less on its Balance Sheet.
  • 50 employees or less.

Your company will count as medium sized if it has at least two of the following:

  • A turnover of £36 million or less.
  • £18 million or less on its Balance Sheet.
  • 250 employees or less.

Small businesses and micro-entities have the ability to use an exemption so that their accounts do not need to be audited. They can also choose whether to send a copy of the Director’s Report and Profit and Loss account to Companies House. The Balance Sheet can also be simpler.

Micro-entities can also prepare simpler accounts that just meet the statutory minimum requirements. They only need to send their Balance Sheet to Companies House.

Limited company annual accounts -company year end

When you set up a company, the `year-end’ is the date that the financial accounts go up to each year. When a company is first set up, the year-end will auto default to the last day of the month of the current month in the following year. Therefore, if you set up your company on 22 July 2022, the year-end will auto default to 31 July 2023.

In the above example, you might not want your year-end to end on 31 July. If this is the case, you or your accountant could file a form online with Companies House to change the year-end date to a different date.

Accounts are prepared to report the company’s financial activities. These are filed with the authorities usually every 12 months.

As a general rule, Companies House annual accounts cannot cover a period longer than 18 months.

Therefore, the latest date that you could change your year-end to in the above example would be 31 December 2022.

If you wish to change your business year-end, you need to do this before the accounts for the current period are due for filing with Companies House. Therefore, you cannot change the year-end after the current filing date.

Being organised   

An aim of a small business should be to hire an accountant. There are many out there to choose from. However, it is important to have a look around and choose a good accountant. If you make the right choice, they will look after the accounts and other related tasks. This will include the preparation of the formal accounts, along with statutory filing. They will also advise you accordingly, throughout the year.

If you like to be organised, there is something else to consider when you have your own company. This is to be aware of when the various filing dates are for your business. The various dates will include:

  • The filing of official documents such as accounts and tax returns.
  • The payment of company and personal taxes.

Example of filing dates   

In terms of filing due dates, company accounts are due with Companies House nine months after the year-end. Therefore, a 31 July 2022 year-end would have a due date of 30 April 2023.

When a company is first registered the year end will automatically default to the end of the month during which it is incorporated in the following year. Therefore, if the business was incorporated on 5 June 2022 the year end would default to 30 June 2023. In this case, for the first company year, the company accounts would be the earlier of:

  • Nine months after the company year-end.
  • 21 months after the date of incorporation.

Therefore, when you or your accountant are filing the accounts with Companies House for the first time, the deadline could be earlier than usual.

In terms of filing the Corporation Tax (CT) Return and accounts with HMRC, the due date is twelve months after your company year-end. Therefore, an accounting period for Corporation Tax purposes ending on 31 July 2022 will have a due date for filing with HMRC of 31 July 2023.

There is also a due date for paying your CT. The date that it is due is nine months and one day after your year-end. Therefore, a 31 July 2022 year-end would have a due date for paying the CT of 1 May 2023.

The pages in company’s statutory accounts

The pages within a small company’s set of statutory accounts will contain:

  • A signed Director’s Report. This is the annual report of the directors and this reports the company’s activities.
  • A signed Balance Sheet. This shows the balances with any third parties at the financial year end. It shows what the company owes and what is owed by the company as at the year-end date.
  • Notes to the accounts -these notes give various further information on the company’s accounting policies. They also show the breakdown of any important items in the Profit and Loss account and Balance Sheet.

Filings your annual accounts Companies House

The accounts that you file with Companies House are a shortened version from the full account. This is because Companies House only require certain information. The Profit and Loss Account and most of the notes to the accounts are not included within the shortened version. Therefore, many accountants prepare `filleted accounts’ for small companies.

When filing accounts with Companies House via electronic software, the Companies House authentication code is required. This code is also required when the Confirmation Statement or any other official changes are filed with Companies House.

As mentioned earlier, there is an option on Companies House to prepare and file accounts for a micro entity. By Companies House definition, micro-entities are very small companies. Your company will qualify as a micro-entity if it has any two of the following:

  • A turnover of £632,000 or less.
  • £316,000 or less on its balance sheet.
  • 10 employees or less.

If your company is a micro-entity, you can:

  • Prepare simpler accounts that meet statutory minimum requirements.
  • Send only your balance sheet with less information to Companies House.
  • Benefit from the same exemptions available to small companies.

Whether you have a small company or a micro-entity, your company will still need to file the full accounts with HMRC. With the accounts your business will also need to file a company tax return (CT600) each year. The tax return will show the company’s taxable profit and any Corporation Tax that is due to be paid.

As a business owner, you should also give a copy of the accounts to your company’s shareholders.

Shorten or extend your year-end     

A company can shorten its year-end as often as it likes, with no constraints. In comparison, it can only extend the accounting period once every five years in normal circumstances. The only exception of which is if it is under administration.

If and when required, your accountant can make any changes to your company’s year-end for you.

Final thoughts

Due to the complexity, most small businesses will provide the relevant information to their accountants to prepare their company accounts. The business owner can then have peace of mind that reporting requirements are taken care of. Their accountant can then prepare and file the company annual accounts and tax return on their behalf. Finally, the accountant will also be able to ensure that your company meets any filing dates and deadlines.

Link to Contractor Advice UK group on

LinkedIn  https://www.linkedin.com/groups/4660081/

Published On: March 20th, 2021 / Categories: Accounting /

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