Preparing annual accounts for your limited company is a legal requirement, but it can seem like a daunting task. In this article, we've taken it back to basics.
Your statutory accounts are annual financial records that are prepared at the end of your company’s financial year and sent to shareholders, Companies House, and HMRC as part of your tax return.
All private limited and public companies must file their accounts each year, although small businesses can submit simpler accounts than their bigger counterparts.
Bear in mind that we’re just providing some pointers here, and you shouldn’t rely on this information to prepare your accounts. Please check the government’s company accounts guidance and speak to an accountant.
Every company must send a copy of its accounts for each financial year to every member of the company, and file their accounts at Companies House. The accounts you file with Companies House are publicly available.
Normally, the time allowed for delivering accounts to Companies House for a private company is nine months from your accounting reference date (ARD). There are penalties for filing your report late, ranging from £150 for filing under a month late, to £1,500 for filing more than six months late.
When you form your company, your first accounting reference date will be a year later, on the last day of the month you incorporated. Your ARD will then be on this date every year. For example, if you incorporated your company on the 6th of July 2018, your first ARD will be on the 31st July 2019.
Statutory accounts include a ‘balance sheet’, which shows the value of everything the company owns, owes and is owed, and a ‘profit and loss account’, which shows the company’s sales, running costs, and any profit or loss made over the financial year. They should also include notes about the accounts.
Depending on the size of your business, you may also have to include a director’s report and an auditor’s report.
If the government counts your business as a ‘small company’ or a ‘micro-entity’, you may be able to send simpler accounts to Companies House and not need to be audited.
Your company counts 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, and 50 employees or fewer. It counts 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, and 10 employees or fewer.
Small businesses and micro-entities can use an exemption so that their accounts don’t need to be audited, and can choose whether to send a copy of the director’s report and profit and loss account.
Micro-entities can prepare simpler accounts that just meet statutory minimum requirements, and send only their balance sheet to Companies House.
There are lots of accounting software products available, which you can use to prepare and file your annual accounts.
Or, if you’re a small company or a micro-entity, you may be able to use the Company Accounts and Tax Online (CATO) service, which allows you to submit your accounts data to both Companies House and HMRC at once.
You can also do your company accounts on paper and send them to Companies House in the post.
You can choose to do your own accounting for your limited company, including preparing and filing your annual accounts.
However, most limited companies hire an accountant to manage their financial matters, as it can be difficult to do everything yourself, and there are severe penalties if you make a mistake.
Accountants are experts in business finance, and if you hire a good accountant they'll be able to take a lot of the stress out of filing your accounts with HMRC and Companies House. They can help you meet all of the legal requirements and avoid any penalties.
However, it’s important to understand that even if you use an accountant, company directors are still the ones who are legally responsible for making sure accounts are accurate.
Your accountant or your accounting software will usually help you to format your annual accounts properly and to include all the necessary information. As we’ve said, what you need to include in your accounts will depend partly on the size of your business.
If you want to double check the required format and content for your statutory accounts, you can look at the relevant regulations, which can be found on the government’s legislation website. Accounts must comply with UK accounting standards.
There are some limited company accounts templates and examples online, including on the Sage website.
What are your biggest struggles when it comes to filing your annual accounts? Tell us in the comments.
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