Ultimate Guideline: Annual Accounts for Companies House

Hey, UK company owners!

As you browse this blog, it’s safe to assume you are a UK company owner. Or maybe you’re interested and somewhat determined to be one. Then you’re at the right place because we will discuss a significant topic today: annual accounts for Companies House.

All limited companies registered in the UK are legally obliged to prepare and submit annual accounts with Companies House every year. You may be able to handle all bookkeeping and accounting duties independently, depending on the size of your company and the complexity of its financial activities. However, most companies hire accountants.

Sounds complicated? Don’t worry; we are here to make the process comprehensive and easy-to-understand for you. So, let’s dive into this ultimate guideline for the company’s annual accounts.

What Are the Company’s Annual Accounts?

Annual accounts are commonly referred to as “financial accounts,” “company accounts,” or “statutory accounts.”

Annual accounts are documents prepared at the end of a financial year to show how a company performed during the accounting period. The information in the accounts will be used to prepare a company tax return for HMRC and estimate the amount of corporation tax owed by a company.

All limited companies must send their annual accounts to Companies House. It does not matter if you have been successful, broke even, have not traded, or have been dormant.

What Exactly Is a Financial Year?

A financial year is a twelve-month period in which governments, businesses, and other organizations calculate their budgets, profits, and losses. A financial year is often used in business to compare with the calendar year.

In the UK corporate world, a financial year is a 12-month period for which annual accounts are made. Your company’s financial year begins on the day after the previous fiscal year ends or the day of incorporation for those who have just formed a company.

Remember that the Accounting Reference Date (ARD), which ends on a specific date, is the basis for determining financial years. You can set up your accounts to the ARD or date them up to 7 days on either side of the ARD.

Company’s Accounting Reference Date or ARD

The Accounting Reference Date (ARD) is when a company’s financial year ends. It is usually the last day of a month, but it can be any date within a month.

All companies are required by the Company Act 2006 (the ‘Act’) to produce accounts for each financial year. Your company’s financial year, or the accounting reference period (ARP), runs from the date of incorporation to the Accounting Reference Date (ARD). The ARD of your company is 12 months after the last day of the month it was incorporated.

For Example:

You registered a company on July 1, 2019—your first ARD will be July 31, 2020.

Annual accounts must be set to this accounting reference date and filed at Companies House no later than 9 months after the ARD.

Can an Accounting Reference Date or ARD Be Changed?

The ARD of a company can be changed before the submission deadline. However, it cannot be changed if a company has past-due accounts (unless it is in administration).

You can shorten your 12-month financial year by any number of months you want, as often as needed. However, a financial year can only be extended once every five years and for a maximum of 18 months from the date of incorporation or the previous year’s ARD.

To change your company’s ARD, the company director must fill out Form AA01. It is a simple procedure that should only take a few minutes. All future annual accounts will be made on the new ARD unless you change something else about your financial year.

Important Note: HMRC must be notified immediately of ARD changes that affect corporation tax accounting dates. Unlike the financial year, accounting periods cannot exceed 12 months. If your financial year is over 12 months, you must file two Company Tax Returns-

• One for the first 12 months.
• One for the surplus period.

Different Types of Statutory Accounts

There are three different types of statutory accounts. They are the following:

1. Full Accounts

Full accounts include all reports, including profit and loss, balance sheet, detailed notes to the accounts, accountants report, and directors report—which provides additional important information about the company.

2. Abridged Accounts

Companies that meet the small or micro-entity criteria can send Abridged Accounts, a condensed version of the full accounts. These provide less information about the company and have a simple Balance Sheet and fewer account notes. A profit and loss statement is not included, obscuring much business information.

3. Dormant Accounts

A company is considered dormant if it has had no ‘significant transactions’ during the accounting period or if it was formed but has yet to trade.

Companies House Accounts Filing Requirements

Before discussing the Companies House account filing requirements, we must determine if the company meets the criteria to file annual accounts.

Different kinds of limited companies have different criteria for becoming eligible to submit annual accounts, and their annual account submission varies depending on that. Here, we tried to briefly discuss that:

Small Company Abridged Accounts

Small companies can file abridged (simple) annual accounts with Companies House, consisting of a balance sheet and notes about the accounts.

If a company meets any two of the following criteria, it can be classified as a “small business” for annual accounts:

• An annual turnover of less than £10.2m.
• A maximum of £5.1 million or lower on the balance sheet.
• The number of employees is 50 or less.

Small companies’ accounts are exempt from audit, so no auditor’s report is required. Statutory or annual accounts, however, must still be provided to members and filed with HMRC as part of the Company Tax Return.

Annual Micro-Entity Accounts

A micro-entity is a very small business that meets at least two of the following criteria:

• An annual turnover of £632,000 or less.
• A maximum of £316,000 or less on its balance sheet.
• The number of employees is 10 or less.

Micro-entities can create even simpler accounts than small businesses while benefiting from the same exclusions as small businesses.

Dormant Company Annual Accounts

Dormant companies are only required to prepare dormant accounts. These dormant (inactive) accounts comprise a balance sheet and notes about the accounts.

Companies House classifies your company as ‘dormant’ if it had no ‘significant’ transactions in the financial year you would normally report. Significant transactions do not include the following:

• Companies House filing fees.
• Penalties for late account filing.
• Money paid for stock when the company was formed.

Dormant companies qualifying as ‘small’ can take advantage of the audit exemption and not need to be audited.

Limited Liability Partnerships Annual Accounts

Companies House requires LLPs to file annual accounts within 9 months of their accounting reference date (ARD). The first set of accounts must cover the period from incorporation to the ARD, with subsequent accounts covering 12-month periods. LLPs that qualify as micro-entities or small businesses may file shortened accounts. All members must approve accounts before a designated or nominated member (director) can sign them.

After meeting the criteria or determining your company structure, you must gather the following documents to prepare a proper annual account for Companies House.

Company’s Annual Accounts Required Documents

Complete and ideal Annual accounts for Companies House consist of the following:

The Balance Sheet

The balance sheet is a financial statement that shows what a company owns (assets), what it owes (liabilities), and the difference between the two (shareholders’ equity). It is a snapshot of the company’s financial health at a specific time.

The Profit and Loss Statement

The Profit and Loss Statement shows whether a company made a profit or loss over a specific period. It includes income, expenses, and taxes. If the company makes a profit, dividends can be issued to shareholders.

Notes About the Accounts

Notes about the accounts are supplementary information that supports the accounts. They may be required by law or accounting principles or provided to help understand the company’s financial position.

The Directors’ Report (Unless You Are a Micro-Entity)

As per the Companies Act 2006, a directors’ report is a financial document that larger companies must include in their annual accounts. It summarizes the company’s performance, current financial position, future prospects, and proposed strategies. The report also includes information about the company’s risks and uncertainties and how the directors manage them.

This information helps company members and other accounting information users understand the business’s overall financial health and viability.

An Auditor’s Report (Depending on the Size of Your Company)

An auditor’s report independently evaluates a company’s annual accounts. It states whether the accounts have been prepared adequately and gives an accurate and fair view of the company’s assets, liabilities, and financial position. Private limited companies must include an auditor’s report in their annual accounts unless they are small and qualify for audit exemption.

Name and Signature of the Company Director

A director of the company must sign the annual accounts. This is to confirm that the accounts are accurate and that the director takes responsibility for them.

The director’s signature is a legal requirement and is vital for ensuring the authenticity of the annual accounts. It also helps to protect the company from liability if there are any errors or omissions in the accounts.

How Do I File Company Accounts?

After gathering all the required documents, signing them by the members or directors, and meeting all the criteria, you will need a password and authentication code from Companies House to file your company’s accounts online through the Companies House WebFiling service.

The detailed procedures are titled “Filing Annual Accounts in the UK Procedures” below.

If you have a private limited company that does not require an auditor, you can file your Companies House accounts and HMRC company tax return using the company accounts and tax online (CATO) service.

How Do I Send Annual Accounts to Companies House?

You can use the Companies House filing service (Companies House WebFiling service) to send annual accounts to Companies House. This service allows you to file your accounts electronically.

To use the Companies House filing service, you must create an account and then upload your accounts in PDF format. You will also need to pay a filing fee.

Who Must Receive Limited Companies’ Annual Accounts?

Companies’ annual accounts should be delivered to:

• The Companies House.
• His Majesty’s Revenue and Customs (HMRC) as part of their Company Tax Return.
• Company shareholders or guarantors (also known as “members”).
• Debenture holders, as they are creditors of the company.
• Anyone eligible to attend general meetings.

Filing Annual Accounts in the UK Procedures

The annual accounts of your company, also known as “statutory accounts,” are prepared at the end of your financial year from the company’s accounting records.

Now, about how to put together statutory accounts. Take a look below to learn clearly:

Determine if Your Company Needs to File Annual Accounts

Not all companies need to file annual accounts with Companies House. The criteria for audit exemption will be given below under the title, “Criteria for Different Kinds of Limited Companies to Submit Annual Accounts.”

Gather the Necessary Information

You must gather the information mentioned above to prepare your annual accounts.

Prepare the Annual Return

The annual return is a document that provides information about the company’s directors, shareholders, and activities to Companies House. The annual return form is available on the Companies House website.

File the Annual Accounts and Annual Returns

You can file your annual accounts and returns online (Companies House WebFiling service) or by mail. The filing deadline for annual accounts is 9 months after the end of the company’s financial year.

What Are UK Company Financial Statements?

A financial statement is a report that shows a business or company’s each and every financial activity and performance. Lenders and investors use it to assess a company’s financial health and earning potential. Company directors or owners also use it to keep track of the company’s all kinds of transactions.

Types of Financial Statements

Any company’s accounting includes four basic financial statements:

1. Balance Sheet.
2. Profit and Loss statement.
3. Cash flow statement.
4. Note to financial statements.
5. Statement of changes in equity.

As part of their Corporation Tax return, businesses must submit their financial statements in iXBRL format to HMRC.

Can I Complete My Own Annual Accounts?

Sole traders may find it easier to complete their annual accounts than limited companies, which will inevitably have more complex accounting requirements. Annual accounts for limited companies must adhere to the Financial Reporting Council’s (FRC) stringent accounting regulations.

Company directors are accountable for maintaining accurate annual accounting records and filing relevant documents with Companies House and HMRC timely. If you do not believe you are capable of competent bookkeeping or lack the necessary accounting knowledge, you should consider hiring an accountant, as the risk of incorrect filing could be disastrous.

Furthermore, with insider knowledge of handling your finances, professional accountants can help you minimize your tax bills.

Should I Hire an Accountant to Prepare My Annual Accounts?

Even if you are not legally required to do so, it is advisable to seek professional assistance when preparing your annual accounts. This is because some specific rules and regulations must be followed when putting together company accounts, and an accountant will have the knowledge and experience to ensure these are followed.

Failing to prepare accurate annual accounts could result in Companies House or HMRC penalties.

What Are the Primary Responsibilities and Benefits of an Accountant?

The primary responsibilities and benefits of an accountant are the following:

• Creating tax forms and ensuring that taxes are paid on time and correctly.
• Completing and submitting statutory compliance paperwork.
• Keeping proper accounting records.
• Creating and submitting annual financial statements.
• Managing Company Directors’ Self-Assessment Requirements.
• Keeping the company informed of changes in tax laws and legislation.
• Dividend payments to shareholders must be issued and recorded.
• Ensure the accuracy and compliance of financial documents with applicable laws and regulations.
• Performing periodic accounting tasks such as credit and debit reconciliation, auditing, and reviewing financial reports as needed.
• Creating and maintaining major financial reports.
• To offer cost-effective, revenue-boosting, profit-maximizing advice.
• To carry out and direct risk assessment evaluations.
• etc.

How Do I Choose an Accountant?

Choosing the right accountant is critical, especially if your company is subject to strict tax regulations or is rapidly expanding. Finding a reputable accountant or local firm with experience working with startups is sufficient for most small businesses. Seek referrals from friends or professional contacts.

Set up initial meetings with a few accountants to compare services and fees. Many firms provide fixed-fee options, either monthly or annually, for peace of mind and effective planning.

Alternatively, choose a pay-as-you-go accountant to pay for services as they are required. Ensure that all requirements and fees are discussed to avoid unexpected costs.

Some Factors to Consider Before Choosing an Accountant

The factors are:

• Credentials and Qualifications.
• Relevant Work Experience.
• Service Offerings.
• Expertise in the Industry.
• Accessibility and proximity.
• Charges and billing.
• Client feedback and testimonials.
• Ethical principles.

To learn more, you can check out our guidelines for UK accountants.

What Information Should I Provide to an Accountant?

If you hire an accountant, you must provide them with some information. The information may include the following:

• Receipts and invoices for all goods and services purchased or sold by the company.
• Financial account statements.
• Loan agreements.
• Checkbook stubs.
• Cash books and petty cash books.
• Payroll documentation.
• Dividend vouchers.
• Details of any finances owed to the company or owed by the company.
• General expenses.
• Utility bills.
• Rent.
• Insurance.
• Professional fees.
• Marketing and advertising.
• Travel and Entertainment.
• Office Supplies.
• Depreciation.

If you hire a tax advisor or an accountant to complete your annual accounts and tax returns, you must notify HMRC immediately. However, as the company’s director, you are ultimately liable. So, you must give your accountant accurate records and ensure they file your accounts and tax returns by the deadlines set by law.

Should I Notify HMRC about the Accountant?

If you hire a tax advisor or an accountant to complete your annual accounts and tax returns, you must notify HMRC immediately. However, as the company’s director, you are ultimately liable. So, you must give your accountant accurate records and ensure they file your accounts and tax returns by the deadlines set by law.

When Is the Company Accounts Filing Deadline?

The company accounts filing has two different deadlines. Take a look below:

• You must file your first account with Companies House 21 months after registering.
• You must file annual accounts with Companies House 9 months after your company’s financial year ends.

When Are the Annual Accounts of Limited Companies Audited?

Small and medium-sized companies are not required to have an audit unless their articles of association explicitly state that an audit is required or if shareholders who own at least 10% of the issued shares request an audit.

Audits are a time-consuming and expensive process involving a complete inventory of all assets and thorough analyses and reviews of all accounting records, including bank statements. Independent accountants with the right to act as auditors must conduct audits.

Audits can be beneficial because they allow you to assess your company’s financial health and further assure lenders and investors of its viability and potential profitability.

Which Companies Must Have an Audit?

• A public company (unless it’s dormant – you read about it above).
• A subsidiary company (unless it qualifies for an exemption).
• An authorized insurance company.
• Carrying out insurance market activity.
• Involved in Financial Activities.
• An electronic money (e-money) issuer.
• A MiFID (Markets in Financial Instruments Directive) investment firm.
• A company that manages Undertakings for Collective Investment in Transferable Securities (UCITS).
• A corporate body and its shares have been traded on a regulated market.
• A funder of a master trust pensions scheme.
• A special register body.
• A pension or labor relations body.

Your company must have an audit if any of the following occurred during the financial year:

Note: If you are unsure about an audit, consult a legal professional or accountant.

Accounting Records That My Company Is Required to Keep

To complete your company’s annual accounts and tax returns, you must maintain financial and accounting records, information, and calculations such as:

• All revenue/money received by the company; Invoices, contracts, sales books, grants, and payments. from coronavirus (COVID-19) support schemes, and till rolls.
• All money spent by the company; Receipts, petty cash books, orders, and delivery notes.
• Details of all goods and services purchased and sold by the company.
• who you bought and sold things to and from (unless you run a retail business).
• Details about all the assets owned by the company.
• Debts the company owes or is owed.
• Mortgages and loan agreements.
• Lease agreements.
• Any other relevant documents, for example, bank statements and correspondence.
• Stock owned by the company at the end of the financial year.
• The stocktaking company is used to calculate the stock figure.

You are legally required to keep all accounting records for at least 6 years (sometimes longer) from the end of the financial year to which they relate. HMRC may check your accounting records to ensure you provide accurate information, pay the right amount of tax, and keep proper records.

Note 1: You can be fined £3,000 by HMRC or disqualified as a company director if you do not keep accounting records.

Annual Accounts for Companies House Late Filing Penalties

You must file your annual accounts for Companies House before the deadline passes. Otherwise, you will be subject to penalties. The penalties are the following:

• Your penalty will be £150 if you miss the deadline by one day, up to one month.
• Your penalty will be £375 for 1 to 3 months.
• The penalty will increase to £750 after 3 to 6 months.
• If you are late for over 6 months, the penalty is £1,500.

The penalty will be doubled if companies file their annual accounts late for 2 consecutive years.

These are penalties for private limited companies. Penalties differ for public limited companies.

You will automatically receive a penalty notice if your accounts are not filed by the deadline. If you are late on your accounts for the second year in a row, the penalty is doubled.

Note: If you still don’t comply, Companies House will send a letter—also known as the first Gazette—notifying you that your company will be struck from the register. It is referred to as a Compulsory strike-off.

FAQs

Q1: Who can file my annual account on behalf of me?

Answer: An accountant or tax professional can file your account on your behalf. You can:

• Provide your Companies House authentication code to your accountant or tax adviser so that they can file your accounts.
• Appoint a representative to file your Company tax return.

Q2: Can I submit my accounts to HMRC instead of Companies House?

Answer: No, you cannot submit accounts to HMRC instead of Companies House in the UK.

Companies House and HMRC are two separate government bodies with different functions. Companies House requires companies to submit annual accounts for transparency, while HMRC requires tax returns and payments for taxation.

Q3: Why do accounts get rejected by Companies House?

Answer: One of the most common reasons accounts are rejected is that the company name or number is missing, incorrect, incomplete, or inconsistent. The company name and registration number must be consistent and match what is on Companies House records throughout the document.

Q4: What is IXBRL?

Answer: The Inline eXtensible Business Reporting Language, or iXBRL, is an open standard allowing a single document to contain human and machine-readable data. Corporation Tax customers must file their Company Tax Returns online, using iXBRL (Inline Extensible Business Reporting Language) accounts and computations. As part of their corporation Tax return, businesses must submit their financial statements in iXBRL format to HMRC.

Q5: Do all UK companies have to file accounts?

Answer: Even if your company is dormant or not trading, you must file annual accounts with Companies House.

Wrapping Up

Well, that’s it. We hope the Annual accounts for Companies House are clear to you. Now you know all the rules, regulations, compliances, penalties, everything.

Still have questions? Please contact Business Globalizer for our experts’ 24/7 customer support and Premium Business Consultation.