Unlike sole traders, limited companies are legally required to file their statutory year-end accounts with both HMRC and Companies House.
The reason for this is that, because the directors of limited companies are not personally liable for the debts of the company. All financial information must be transparent and made public for examination by anyone. From suppliers to investors and customers.
What is a company year end?
A company ‘Year End’ is the date your company’s accounting period ends. It’s also the date the clock starts ticking for a limited company to send certain documents to HMRC and Companies House. Companies can choose their own date for year-end accounts. Usually, the simplest way is to use a year end date of 31 March or 5 April.
Corporation Tax must be paid to HMRC within 9 months and 1 day of your year end. You must file your annual accounts with Companies House within 9 months of your year end.
Temporary extension to company accounts filing deadlines.
As a result of the COVID-19 emergency, HMRC announced that from 27th June, companies will have an extension to their statutory accounts filing deadline. The filing deadline is extended if it falls between 27th June 2020 and 5th April 2021 (including these dates).
This means that for a limited company, the deadline for filing accounts at Companies House is extended from nine months to 12 months.
What needs to be filed with HMRC
Company Tax Return
Your Company Tax Return (CT600) contains details of your company’s income, less any tax allowances and expenses. The remaining amount – your profit – will then be used to calculate how much Corporation Tax your company must pay.
Annual Accounts or Statutory Accounts
You need to submit to HMRC the following annual accounts:
- Income Statement – This document shows the profit or loss you made for the accounting period.
- Statement of Financial Position – A snapshot at your company’s accounting period end date showing the cumulative value of a business based on its assets, liabilities, capital, and reserves.
- Footnotes – Information about the transactions between your company and its directors (such as loans, advances and guarantees).
What needs to be filed with Companies House
If you prepare your annual accounts using the financial reporting standard for micro-entities (FRS 105) then you need to submit two documents from your Annual Accounts to Companies House: the Statement of Financial Position and the Footnotes. The documents you submit will be published by Companies House on its website and can be viewed by anyone.
What if I miss the deadline?
Of course, as with everything, HMRC has penalties in place to encourage limited company owners to file their CT600 and Abbreviated accounts before the deadline. The penalties increase with time, so if you are continually missing the deadlines, you can expect it to cost you dearly.
CT600 late filing penalties
£100 – if you miss your filing date
£100 – if you still haven’t filed after 3 months
Increase to £500 – if you file late three years in a row
How should you prepare?
The key to a smooth year-end is preparation. If you ensure your accounts are up-to-date, and run a few pre-year-end checks, the whole thing should be a piece of cake.
Accounting checklist for Year End Accounts
Check if you are claiming all expenses
Every penny you claim as a tax-deductible business expense is a penny off your business profits. And less profit means less Corporation tax. It vital that you claim all expenses you can before your year-end. HMRC’s rule says the expense must be “wholly and exclusively” for business use.
Generate a cash flow statement
Cash is the fuel that runs your business. So you never want to be running near empty. Forecasting how much cash you will need to pay the upcoming week/month shows you to reserve enough to pay bills, including your employees and vendors. All you need is a simple cash flow statement listing expected cash expenses against expected cash payments.
Check your Profit & Loss (P&L) income statement
Your income statement lists revenue-generating items along with tax-deductible expenses. It’s a useful way to see your profit and loss for the year.
Review unpaid invoices from vendors
Your company year end should be as accurate as possible, so turn debt collector a few weeks beforehand and chase up any unpaid invoices you may have. Once you have the money in your company bank account, you can reconcile your accounts in your accounting software, making sure they’re 100% accurate.
Collect all your paperwork
When you’re putting your company accounts together you’ll need to make sure you’ve got all the records and receipts you need to back them up. Before filing your company year end, make sure you have records for everything – this can mean getting statements of account from suppliers, copies of bank and credit card statements from financial institutions, and records of any other income you receive. You need to keep company records for at least six years from the end of the company accounting period they relate to.
Confirmation statement
As a director of a limited company, you need to confirm your company information with Companies House once a year. Failure to file a Confirmation Statement can result in directors being fined personally in criminal courts, and companies being struck off the Companies House register. It basically summarises the details of your company name, registered office, details of directors and shareholders, secretary and the address where you keep your records. You will get an email or letter alert to your company’s registered address when it is due
Keep documents and file receipts
Maintaining documents and records are a core part of your business. Your accounts mean nothing if you don’t have proper records to back them up. So before you file your year-end make sure you have everything – right from statement of accounts from suppliers to bank and credit card statements, and records of income you have received.
VAT returns
If your company is VAT registered (on either the Flat Rate Scheme or the standard scheme), you will most likely have a VAT return due at the same time as your company year end. VAT returns aren’t often thought of as part of a company year end, but they usually coincide with one.
Financial planning
The run-up to your year end is the perfect time to think about some financial and tax planning, This can help minimise your tax bill in the immediate future and also the long-term. Options include paying money into ISAs, bringing your spouse or partner into your business and channelling some of your income into a pension.
Review your suppliers
It’s a great idea to review your service providers once a year anyway to make sure you’re getting value for money – why not do it at your year end? That way you can ditch any overpriced or unneeded suppliers and start afresh in the new financial year.
How to use your year-end accounts?
Create a budget for the following year
It’s never too soon to plan. By reviewing your P&L accounts, income and cash flow statements you will start seeing a pattern in things you need to plan better for the next year. By revaluating your expenses from the current financial year you will gain a better understanding of how you should focus in the new accounting year.
Time for financial planning
Did you achieve your financial goals you intended last year? If so, great. If not, the run up to your Year End is the perfect time to think about some financial and tax planning. It will help minimise your tax bill in the immediate future, and also the long-term. This could include, bringing your spouse/partner into your business, paying money into ISAs, or diverting some of your income into a pension.
Read more about the services we offer to help your business with your Company Year End Accounts at https://libabunaccountancy.com/
If you have questions about this topic, please give us a call on +44 01234 712840.
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