Running your business can bring a rewarding experience but gets stressful at times. One such daunting event is filing company accounts. It is a legal requirement for every business, whether making a profit or loss, trading or dormant.
Owners without prior knowledge on how to file company accounts and submit them within time suffer. It includes your statutory annual accounts and company tax return.
This post covers every information you require about filing and submitting company accounts.
Table of contents
● What are company accounts?
● How to prepare company accounts?
● How to file company accounts?
● How to prepare company accounts for small companies and micro entities?
● How do dormant companies file their accounts?
● When do you need to file company accounts?
● Wrapping up
What are company accounts?
Company accounts are also known as financial, annual, or statutory accounts. They contain detailed information on the transactions, operating performance and the financial positioning of a company.
Limited companies must file their accounts every year. The purpose is to provide an accurate and fair view of the company’s financials, performance, and cash flows for a fiscal year.
How to prepare company accounts?
To understand how to file accounts with Companies house, you need to know what accounts to include. These are a profit and loss account, a balance sheet, cash flow statement, notes and a directors’ report.
Certain companies must provide an auditor’s report, except for small or micro entities that take advantage of audit exemption. Smaller and micro companies can don’t have to file all these reports.
Components of company accounts
Profit and loss account
The profit and loss account includes calculating a business profit or loss made in the reporting year. It includes:
● Turnover
● Cost of sales
● Gross profit or loss
● Operating profit or loss
● Pre-tax profit
● Corporation tax due
● Profit or loss for the reporting year
In short, this account shows the trading activity of the business, the revenue generated, and the profit or loss scenario of the company till the last day of the fiscal year.
It includes two sets of figures, one for the reporting year and the other for the previous year.
Balance sheet
A balance sheet summarises the company’s financial position on the end date of the financial year and puts a value on everything a business owns.
It usually includes fixed assets, current assets and liabilities, non-current liabilities and owners’ equity.
It includes two sets of figures, one for the reporting year and the other for the previous year.
Notes
This section provides additional detail and supporting information to help users understand the current economic position of the company.
These usually include:
- Additional information about the company and its ultimate owners
- Accounting principles and conventions used
- Detailed accounting policy notes for items like taxation, revenue recognition, employee share schemes, pension policy,
- dealings with directors and intercompany transactions
- breakdown of items reported in the balance sheet, profit and loss and cash flow statement.
Directors’ report
It includes a narrative section rather than a set of numbers. A directors’ report reminds shareholders of a business’s core activities and updates on its performance over the last year and future prospects.
It provides information on:
● Company’s financial health
● Company’s performance
● Capacity to expand and grow
● Company’s efficiency in complying with financial laws
● Changes in directors and shareholding patterns
Usually, large companies use directors’ reports.
Auditor’s report
An auditor’s report offers an independent evolution of the annual accounts by an external auditor. It states:
● the responsibilities of different directors and the auditor,
● the standard account practices followed in the company,
● ensures whether the accounts are prepared to follow the company’s Act 2006, and
● the statement on whether the financial statements offer an true and fair view of the company.
How to file company accounts?
Limited companies must file Company accounts with Companies House and HMRC while submitting their tax returns. New entrepreneurs may wonder about how to submit accounts to Companies House. You can do it online.
How?
● Register your company for online filing
● Provide an email address and choose a password
● Have the company’s authentication code in hand- something you got at the time of setting up your company
How to prepare company accounts for small companies and micro-entities?
Small companies can file abridged accounts, a simplified version of company accounts that do not require submitting a directors’ report or a profit and loss account.
A company is said to be small if it has any two of the following criteria
● Turnover is less than £10.2 million
● A balance sheet is less than £5.1 million
● Working with less than 50 employees
Micro companies can file micro-entity accounts if they follow any two of the given criteria.
● Turnover of less than £632,000
● Balance sheet less than £316,000
● Working with not more than 10 employees
How do dormant companies file their accounts?
If you own a dormant company and are wondering how to submit company accounts, let’s look into the requirements.
A company is said to be dominant by the Companies House if it has significant accounting transactions during an accounting period. Such transactions don’t include:
● Filing fees paid to Companies House
● Penalties for late filing
● Money paid for shares during the company incorporation
For free, you can submit dormant accounts by the Companies House Web filing system. However, on late submissions, you must pay penalties.
If your company restarts trading, you don’t need to inform the Companies House but must indicate on your next account submission that the company is no longer dormant.
When do you need to file company accounts?
Every company filing their accounts will have an accounting reference date, from which you can calculate the deadline for filing their accounts.
● For new companies: 21 months after registering with companies house
● For established ones: 9 months after the end of the company’s financial year
You must pay corporation tax in nine months and one day after completing your accounting period for corporation tax.
Furthermore, you must file a company tax return 12 months after the end of your accounting period for corporation tax.
Penalties for late filing
● Up to 1 month: £150
● 1 to 3 months: £375
● 3 to 6 months: £750
● Above 6 months: £1,500
● For two years of late submission in a row: penalties are doubled.
Wrapping up
You can file your company accounts with the help of software products.
However, several companies hire professionals, such as accountants, to file and submit accounts on their behalf. A professional can offer essential advice to assist you in making the right decisions and claiming all allowances.
Even if you were hiring someone to file your accounts, it’s your responsibility as a director to check whether the accounts are filed correctly and on time.