Introduction
All limited companies in the UK must file their accounts with Companies House every year.
This applies whether your company is making a profit or a loss, breaking even or even not trading at all.
These company year-end accounts are your statutory accounts.
You’ll need to know:
- What these accounts must include
- When you need to file them
- How to prepare and submit them
What are Statutory Accounts?
Statutory accounts are your company’s annual accounts. You must prepare them for:
∙ Companies House
∙ HMRC
Copies of your statutory accounts must also go to shareholders or members.
These accounts report your financial activity over 12 months. They provide the information for calculating how much corporation tax you will need to pay to HMRC.
A company director has a legal responsibility to file these accounts by the statutory deadline and ensure that they are accurate.
Full statutory accounts must include:
- Balance sheet
- Profit and loss account
- Notes about the accounts
- Director’s report
- Auditor’s report
- Name and signature of the company director
However, some companies can file shortened versions of statutory accounts with Companies House.
These businesses are:
- Small companies
- Micro-entities
Small companies must meet at least two out of these three criteria:
- Annual turnover of £10.2 million or less
- Balance sheet total of £5.1 million or less.
- No more than 50 employees
Micro-entities must meet at least two out of these three criteria:
- Annual turnover of £632,000 or less
- Balance sheet total of £316,00 or less.
- No more than 10 employees
Both small companies and micro-entities must still file their statutory accounts. These can be abridged or simplified versions, known as micro entity accounts.
They must include a balance sheet and profit and loss information but do not require a director’s report.
Small companies and micro-entities may be able to apply for exemption from being audited. Where this applies, they do not need to complete an auditor’s report either.
What Information Must I Include in Statutory Accounts?
- The balance sheet must show the value of everything your company owns. It must show what you owe and what others owe to you.
- The profit and loss account shows your company’s sales, its running costs and what profit or loss it has made over the past financial year.
- Notes about the accounts should provide relevant supporting information that explains your company’s current financial position.
- The director’s report should demonstrate whether the company’s finances are healthy and how well the company is performing. It should indicate whether there is room for expansion and growth. It should give details about how the company is complying with financial regulations.
- The auditor’s report contains the auditor’s opinion of the company’s financial statements and whether these comply with regulations.
Many companies will be exempt from being audited if they meet the criteria for a small business. When this is the case, they do not need to include an auditor’s report in their statutory accounts.
What are Abridged Accounts?
Abridged accounts are simplified versions of annual company accounts. They do not need to include a profit and loss account or a director’s report.
Companies classified as small can submit abridged accounts. These accounts are still statutory and must be submitted within normal deadlines.
If your company has an even smaller turnover, then it may qualify as a micro-entity. When this is the case, you can submit accounts containing less information than for a small company.
Micro-entities are exempt from auditing and do not need to submit a director’s report or a profit and loss account.
Do Dormant Companies Need to File Accounts?
A dormant company is a company registered with Companies House that has had no significant transactions during its financial year.
These significant transactions include doing business and receiving income. They do not include fees paid to Companies House, penalties for late filing of accounts or money paid for shares when the company was incorporated.
A dormant company must still file its annual accounts with Companies House.
It does this by filing dormant accounts and including a confirmation statement. The form for doing this is AA02.
When are My Statutory Accounts Due?
The first time you prepare your company accounts, they are due within 21 months of the incorporation of your company. This will cover a 12 month period from your month of incorporation to your accounting reference date (ARD).
You receive your ARD when you register your company with Companies House. This becomes your end-of-financial year date. Your ARD stays the same, year on year.
After your first annual accounts, you will have nine months after your ARD in which to file your accounts with Companies House.
Under certain conditions, you can change your ARD to extend or shorten your financial year:
- You can extend your financial year once every five years, and up to 18 months from the incorporation date or the date of the previous year’s ARD
- You can shorten your financial year by as many months and as often as you want.
If your accounts are overdue or your company goes into administration, you cannot change your ARD.
If you’re late in submitting your accounts, you’ll face an automatic penalty.
For private companies the current penalty amounts are:
- Not more than one month late – £150
- More than one month but under three months – £375
- More than three months but under six months – £750
- More than six months – £1,000
If you file your accounts late in two successive years, the penalties double.
Can I Do My Own Accounts?
Nothing is stopping you from doing your own annual accounts, but this can involve a lot of work and take up your time.
Your accounts must include various elements:
- Balance sheet
- Profit and loss account
- Supporting notes
- Director’s report
With each of these, you must ensure that the information you file is accurate and that you don’t omit any information that Companies House needs.
Your report should provide an accurate picture of your business’s financial activities to meet legal requirements.
If you’re a small company or micro-entity, you may be exempt from submitting a full set of accounts, including the director’s report.
The balance sheet is a statement giving details about your company’s assets and liabilities.
Fixed assets include vehicles and equipment. Current assets include cash your company holds and cash in its bank account
Liabilities are your short-term and long-term obligations, usually debts, requiring repayment.
The balance sheet in your statutory accounts shows how much money you have spent in the financial year. It is a snapshot of your company’s financial health.
The profit and loss account records your financial performance over time, showing your total revenue and expenses during the financial year.
It shows your gross profit, which is your turnover figure minus the cost of your sales.
As part of your profit and loss account, you should also subtract administrative expenses such as salaries, pension payments, utility payments, rent and loans from your gross profit.
The supporting notes in your statutory accounts should provide supplementary information that supports and clarifies your financial data. You may wish to comment on specific balance sheet entries or profit and loss items.
Where you have included estimates about your future performance, notes can provide supporting evidence and detail.
There are several things you can include in the director’s report that goes with your statutory accounts when you file them with Companies House:
- Performance analysis of your company
- Summary of the company’s current financial position
- Its main business activities, objectives and strategies
- The current condition of your market and its future viability
- Future prospects and developments
- The company’s growth capacity
- Recommended dividend payments.
- Factors that might impact the company’s performance such as market or industry trends
- Main risks and uncertainties and any financial events happening after the balance sheet date that will affect the company
- Any significant changes to the company’s assets
- Your methods for assessing prospects, risks and uncertainties
- Your methods for managing challenges and opportunities
For larger companies submitting director’s reports with their statutory accounts, this is a way of putting financial performance and position into context.
The idea is that the director’s report will help anyone looking at the accounts to get a clear picture of your company’s financial health and overall viability.
You should state whether your company and its directors have been complying with all the required and necessary regulations, responsibilities and standards.
Can I Submit My Own Accounts?
Just as you can prepare your own accounts, so you can file them yourself too, if you wish.
You must file your statutory accounts with Companies House and your company tax return with HMRC.
Private limited companies that are exempt from being audited can submit their accounts and tax return together, online with HMRC.
There are also ways of doing this using dedicated accounting software.
If your company does not have an auditing exemption, then you must submit your annual accounts and tax return separately.
For your tax return, you’ll need a Government Gateway user ID. You can file your statutory accounts with Companies House online.
Limited companies tend to have more complex accounts than sole traders. The process of preparing and submitting them is demanding of time and resources. You must ensure that your company year-end accounts comply with strict FRC UK accounting standards.
Company directors have legal responsibilities to maintain clear, accurate accounting records and to file them within the statutory deadlines.
Filing your own company accounts means taking on a huge burden of responsibility and being confident that your accounts are accurate and include all the necessary details and data.
Trust a professional, chartered accountant to submit your company accounts
Opting for a professional accountant to do your statutory accounts for you, means you can have full confidence in both the process and the outcome.
Plus, you get an additional pair of eyes with an in-depth view, examining your accounts and analysing your performance.
At Venn Accounts, we provide chartered accounting services for SMEs and startups that combine a traditional, personal approach with state-of-the-art software. This ensures that your statutory accounts are accurate, reliable, incisive and on time.
For more information on how we can help you with your company accounts, please contact us.
