Preparing your company’s statutory accounts and filing with Companies House is one of the essential responsibilities of a limited company director. Meeting Companies House and HMRC deadlines is crucial to avoiding unnecessary penalties.
All companies must file accounts with Companies House within 9 months of the financial year-end. The company tax return and statutory accounts must be filed within 12 months of the company’s financial year-end. However, the deadline for corporation tax is 9 months and 1 day from the financial year end.
This is why most accountants will work to a deadline of 9 months from the end of the financial year. However, when you established your limited company, your primary goal probably wasn’t to keep HMRC and Companies House happy.
That said, the sooner your accounts are prepared after your accounting period, the sooner you know what profits the business has made and what corporation tax is due. It also allows you to collaborate with your accountant to understand and gain insight into what the information within the accounts means for you as a business owner.
Read our blog below to find out all you need to know about preparing your company accounts, understanding the differences between the accounting period for corporation tax and your statutory accounts, and how this corresponds with the company’s financial year-end.
What does preparing accounts mean?
The term “preparing annual accounts” refers to the process of organising, compiling and consolidating a business’s financial data and information for a specified period. This involves accurately categorising the company’s transactions to create a set of financial statements that precisely reflect the financial position and performance of the business.
This process may encompass handling the primary financial records of the business, including bank statements. However, in most cases, it involves working with the accounts after the completion of bookkeeping, where journal entries are created to provide a comprehensive and precise representation of both the profit and loss account and the balance sheet.
These adjustments frequently involve factors such as asset depreciation, payroll, and accommodating expenses that span the year-end.
Once the draft profit and loss statement and balance sheet have been prepared, these documents form the basis of the foundation for calculating corporation tax.
In most businesses, two sets of accounts have to be prepared. The first comprises full statutory accounts, which are attached to the company tax return. The second set consists of abridged accounts (sometimes referred to as fileted accounts) that are filed to Companies House.
Limited company accounts will contain a summary of the company details, a profit and loss statement, a balance sheet, a director’s report and key notes to the accounts so that users can interpret the financial and non-financial information.
Larger companies will have to prepare accounts in accordance with international financial reporting standards and have an auditor’s report.
What if I don’t file my annual accounts?
Company directors are legally responsible for getting their accounts to Companies House within nine months of the end of their company’s accounting period.
If you do not file your annual accounts with Companies House on time, then Companies House can impose fines of between £150 to £1,500, depending on how late the submission is.
From a practical rather than a legal viewpoint, filing accounts late can also negatively impact your credit score. They can reduce the agreed credit limit with suppliers and the ability to raise finance with banks and other financial institutions.
There are also HMRC filing requirements. If your company tax return is not with HMRC within 12 months of the end of the period for corporation tax, HMRC will issue penalties for late submission. Accounts have to be attached to company tax returns, so they need to be prepared to remain compliant with HMRC.
Why are annual accounts important?
Accounts are important for a number of reasons. Not only are they part of a company’s legal compliance, they are important for financial management and decision-making.
Company accounts provide a clear and transparent view of a company’s financial activity, allowing not just the directors but also other financial stakeholders the ability to assess the health and performance of the business. For instance, when seeking business finance, accounts are a key factor in the decision-making process.
They also offer key information to help business owners in making well-informed decisions. It is pointless fixating on the company’s turnover without understanding whether the business is generating profits or not.
Company accounts are the starting block of budgeting and planning. Without understanding the company’s existing financial position, management can not extrapolate into the future. They provide the basis for strategic planning and are an essential part of a business valuation.
Recording and classifying transactions
Preparing annual accounts involves making sure financial transactions are accurately categorised. For example, the balance sheet needs to contain all of the company’s assets (what the company owns). Therefore, if a laptop has mistakenly been recorded as a computer expense, it must be recorded as a fixed asset.
Other transactions that are typically recorded as part of the process to prepare company accounts are depreciating fixed assets, logging interest on loan accounts, entering the payroll data, making adjustments for income and expenses spanning the accounting reference date and accounting for any non-business expenditures.
Financial statement preparation
Company annual accounts have to be prepared in accordance with UK accounting standards, and part of the preparation process is ensuring that all legally required disclosures are included.
One example of this is the inclusion of the company’s registration number with Companies House on the front page of the limited company accounts submitted to Companies House.
Review and compliance
Once accounts are prepared, they need to be reviewed for accuracy and completeness. A good accountant like Spotlight will have a working file which supports all of the figures, they will also use a year end accounting checklist (sometimes referred to as a disclosure checklist) to ensure that the accounts are fully compliant.
Get your annual accounts prepared and submitted with Spotlight Accounting
Whilst it is a limited company director’s responsibility for delivering accounts to Companies House and filing the tax return with HMRC, at Spotlight, we do all we can to make the financial year end reporting process as straightforward as possible.
If it is the first annual accounts for the company, our expert accounting team will guide you through the process.
As a company director, you have to sign the director’s report, which approves the accounts and the company tax return. All our accounts are issued with an overview video followed by a subsequent meeting. This allows our clients time to digest the information contained within the accounts and tax return and ask questions or seek clarification where necessary.
Preparing company accounts is vital for a number of reasons – especially for limited companies. Yes, they are a legal requirement, but they are a key part of financial management, decision making and demonstrating the financial health and performance of the business.
If you would like to know more about how to prepare annual accounts for your company, then contact us, and we will gladly guide you through the process.