If you have set up in business, it’s important that you understand all about your company annual accounts.
You should know:
- What your accounts must include
- When they are due
- How you prepare and file them
- The deadlines for filing them.
You should also consider whether you want to do your own annual accounts, or hire a professional accountant to do it for you.
What Are Company Annual Accounts?
It is a requirement for almost all UK-registered companies to prepare their annual accounts.
Your company annual accounts report your financial activity for a 12 month period and are the basis for working out how much corporation tax you must pay to HMRC.
The company director is legally responsible for making sure that these accounts are accurate, and that they submit them by the statutory deadline.
You must prepare your annual accounts for both Companies House and HMRC. You must also give copies of these accounts to any shareholders or members (guarantors).
Full annual accounts have to include:
- Balance sheet
- Profit and loss account
- Notes about the accounts
- Director’s report
- Auditor’s report (depending on the size of the company)
- Name and signature of company director.
Full annual financial accounts are also known as statutory accounts or company accounts.
Certain companies can submit shortened accounts to Companies House consisting of a balance sheet and notes.
- Small businesses, and
To qualify as a small business, your business must meet any two of the following criteria:
- Anual turnover less than £10.2 million
- Balance sheet total less than £5.1 million
- 50 employees or less.
To qualify as a micro-entity, you must meet any two of these criteria:
- Annual turnover of £632,00 or less
- Balance sheet total of £316,000 or less
- 10 employees or less.
But both small companies and micro-entities must still submit statutory accounts to HMRC and to company members.
When are Annual Accounts Due?
Your first company annual accounts are due within 21 months of the incorporation of your company. Generally, they should cover a 12 month period, starting on your month of incorporation and ending on your accounting reference date (ARD).
After this first year, your accounts will cover a 12 month period, and you will need to deliver them to Companies House no later than nine months after your ARD.
You get your ARD when you register your company at Companies House, and this date is your end of financial year.
Your ARD will remain the same every year, unless you choose to shorten or extend your financial year.
You do this by changing your ARD:
- You can shorten your financial year by as many months you require, and as often as you want, but
- You can only extend your financial year once every five years, and up to 18 months from incorporation date or the date of the previous year’s ARD.
You cannot change your ARD if your accounts or overdue, or if your company is in administration.
How Do You Do End of Year Accounts?
As we have outlined, your accounts must include various elements, to give an accurate picture of your company’s financial activities over the last financial year. The elements required are normally dependent on the size of the company.
This is a financial statement which provides information about your business’s assets and liabilities.
It indicates the financial health of your company at a given time.
Assets are what your company owns, and can either be fixed, such as equipment or vehicles; or current, such as cash in the bank and cash.
Liabilities are your obligations, usually in the form of debts, which you will need to repay.
These can be short-term, which means you need to repay them within a year; or long-term, not requiring payment until the next year.
The balance sheet shows how much money you have spent in the financial year.
Profit and Loss Account
Rather than simply providing a snapshot, which is what the balance sheet does, the profit and loss account records your financial performance over a period of time.
It shows your total revenue and total expenses throughout the financial year.
Take your turnover figure, which is the value of your sales. Subtract the cost of these sales from it and you have your gross profit.
You can then subtract administrative expenses from your gross profit. These include things such as salaries for staff, pension payments, loans, utilities, building rent or mortgage.
If you are a small company, you do not need to file your profit and loss with Companies House. This is normally recommended.
This refers to any supplementary information you provide to support the accounts. These can help to clarify your company’s current financial position, specific balance sheet or profit and loss entries, or support any estimates you include about future performance.
The notes required are determined by the accounting standards. Considerably less notes are required for FRS105 accounts.
How Do You Prepare a Directors Report?
For companies filings FRS102 accounts, you will need to submit a director’s report to Companies House.
For FRS105 based reporting there is an exemption, although it is often good practice to still prepare one.
The directors’ report must contain:
- the names of the persons who, at any time during the financial year, were directors of the company; and
- where the weekly average number of UK-based employees exceeds 250, a statement describing the company’s policy on the hiring, continuing employment and training, career development and promotion of disabled persons.
There are additional requirements for audited mid-sized companies.
Companies may also decide to include a strategic report. A strategic report summarises and puts into context the company’s performance and current financial position.
Your report may include:
- Analysis of your company’s performance
- Summary of its current financial position
- The company’s principal business activities, objectives and strategy
- Current state and future viability of the market you are operating in
- Likely future prospects and developments
- Your company’s capacity for growth
- Trends or factors that might have an impact on the company’s performance
- Main risks and uncertainties the company faces
- Significant changes to company assets
- Important financial events occurring after the date of the balance sheet, that are affecting the company
- How you have assessed prospects, risks and uncertainties
- How you are managing challenges and opportunities
- Recommendations for payment of dividends.
Will Your Accounts be Audited?
If you are a small or medium-sized company, you will not require an audit, unless your company’s articles of association state that an audit is necessary.
Where an audit does apply, it needs independent accountants to carry it out, and then to provide an auditor’s report as part of your annual accounts.
Who Can File Annual Accounts?
Anyone in a limited company can file its annual accounts, but they must make sure the company directors approve these accounts before filing them at Companies House.
The director should be named in the accounts and should sign them before they are filed with Companies House.
How to File Annual Accounts
You should file your company accounts with Companies House, and your company tax return with HMRC.
However, if you are a private limited company that is exempt from auditing, then you can file your accounts and tax return together. You can do this with HMRC online, or by using appropriate accounting software.
Otherwise, to file your accounts separately with Companies House, you can send them online.
And you can file your tax return with HMRC here.
To file your annual accounts online, you will need a Government Gateway user ID and have corporation tax linked to your HMRC account.
What is the Deadline for Filing Company Annual Accounts?
The deadline for filing your company annual accounts depends on the accounting reference date (ARD) of your company
Companies House gives you your ARD when you register your company. This date is the end of the financial year.
- Your first ARD is the anniversary of the last day of the month in which your company was incorporated. If, for example, you registered your company on 6 June 2018, your ARD would be 30 June 2019.
- For your first year, you must file your annual accounts no later than 21 months after incorporation, but should cover your first financial year’s trading.
- For subsequent years, you must file your accounts no longer than 9 months after your ARD each time.
You should send your annual accounts to HMRC as part of your company tax return no later than 12 months after your corporation tax accounting period.
Normally, this period will correspond with the financial year that your annual accounts cover.
This may be different in your first year, in which case you will need to file two tax returns, with one of them covering the extra time included in your first annual accounts.
There are financial penalties for late filing of company accounts.
Can I Submit My Own Limited Company Accounts?
As a limited company, you are very likely to have more complicated accounting arrangements than a sole trader.
The Financial Reporting Council (FRC) has strict accounting regulations, which your company annual accounts must adhere to.
If you are a company director, you have a legal responsibility for maintaining annual accounts records that are accurate, and you must file them within relevant deadlines to Companies House and HMRC.
Incorrect filing could be damaging to your business, so you should not submit your own accounts unless you have solid and up to date accounting knowledge.
It may, therefore, be a better option to use the services of a professional accountant.
An accountant will also be able to apply a significant depth of knowledge and insight to your accounts, helping you minimise your bills, while helping you with strategies to grow your business.
How Much Should Annual Accounts Cost?
If you use an accountant to do your annual accounts, then charges will vary, depending on the accountancy firm you choose.
These accounts are a vital part of your business, so you should consider using an experienced accountancy firm with a proven track record, and an accountant who you can trust.
Plus, the fees you pay to an accountant you can offset against the cost of your own time, if you were to do your own accounts.
Why Use Our Annual Accounts Services?
Venn Accounts specialises in dedicated accountancy services, such as our annual accounts and corporate tax packages, for UK-based SMEs, startups and tech companies. As Xero partners, we use leading, cloud-based accounting software as an advanced tool to support the businesses we work with.
For more information about our services, please call our team of senior chartered accountants on 020 8088 2590, email firstname.lastname@example.org, or complete our contact form, and we will be back in touch as soon as possible.