Can I prepare company accounts myself?
Companies do not have to employ the services of a professional accountant to prepare their accounts. However we strongly recommend that they do so because the rules in relation to the content and layout of company accounts are complex.
Who is responsible for preparing accounts?
The directors are responsible for preparing the company's accounts, even if they delegate this task to the company's accountants. It is the directors who approve the accounts and authorise for them to be signed.
Does my company have to keep accounting records?
Yes. All companies are obliged to keep accounting records, including records of:
- money received;
- money spent;
- assets owned by the company; and
- the liabilities of the company.
Companies that deal in goods should also keep:
- details of stock held by the company at the end of each accounting period;
- details of any stock-take; and
- details of all goods sold and bought, other than by ordinary retail trade, including a description of the goods and the identity of the buyer and seller.
Accounting records should be retained for at least 3 years
(6 years in the case of a PLC).
When is the company's Accounting Reference Date?
You can look up your company's Accounting Reference Date on the Companies House website.
When does the company's accounting period end?
The vast majority of companies' accounting periods end on their Accounting Reference Date. However it is possible that your company's accounting period will end on a different date.
All companies let HM Revenue & Customs know when their first accounting period ends on their 'Corporation Tax -New Company Details' form (CT41G). Please refer to the 'HMRC Forms' guidance for further details.
When HMRC receive the above form they will write to the company confirming the date on which the company's first accounting period ends.
Accounting periods usually last twelve months, for example from 5th February 2009 to 4th February 2010. Accounting periods can be shorter than 12 months, but not longer.
Don't confuse the company's accounting period with the tax year, which runs from 6 April one year to 5 April the next. A company's accounting period can be set and changed by the company; it could start and end on any day of the year.
Where does the company have to file its accounts?
If an accountant prepares your company's accounts he will usually file copies with Companies House and HMRC as part of his service. Make sure that you confirm that he is going to do this.
Companies House - All companies must file their accounts with Companies House.
HM Revenue & Customs - A copy of the company's accounts should be sent to HMRC along with the company's corporation tax return and computations.
Other governing bodies - If the company is regulated by another body, such as the Charity Commission, it may have additional filing obligations.
When do I have to file accounts with Companies House?
The filing deadline at Companies House depends on whether the company is filing its first set of accounts, or a later set.
A company's first accounts normally cover:
- the period from incorporation to the first day of trading (commencing business); and
- the first 12 months of trading.
In other words the first set of accounts normally cover a period of more than 12 months. Where this is the case, account must be filed with Companies House:
- within 21 months of the company incorporating;
- in the case of PLCs, within 18 months of incorporating,
or, if longer, 3 months from the company's Accounting Reference Date.
In the unlikely event that the company's first set of accounts only cover a period of 12 months then the deadline for filing those accounts is the same as it will be for subsequent accounts.
The second set of company accounts (and all others after that) must be filed with Companies House:
- within 9 months of the company's Accounting Reference Date; or
- within 6 months in the case of a PLC.
If a company changes its Accounting Reference Date to a date in the past it will have a minimum of 3 months to file accounts from the date on which the change was made.
Please note that a company cannot change its Accounting Reference Date after the deadline for filing accounts made up to the Accounting Reference Date has passed.
When do I have to file accounts with HM Revenue & Customs?
Companies need to file the following with HMRC:
- company accounts;
- a tax return (Form CT600); and
- computations showing how the accounts relate to entries made on the tax return,
within 12 months of the end of the company's accounting period.
HMRC will remind the company of this obligation by sending a 'Notice to deliver a company tax return' to the registered office shortly after the end of each accounting period.
Do I need to give a copy to anyone else?
The company is required to provide every shareholder (also known as a member) and every director of the company with a copy of the accounts.
In the unlikely event that the company has issued debentures the holders of those debentures would also have to be provided with a set of accounts.
Do I have to file a full set of accounts with Companies House?
Not necessarily. Small (defined below) and medium sized companies may choose to file abbreviated accounts with Companies House. Abbreviated accounts contain less information than the set of accounts which the company provides to HMRC, the shareholders and the directors.
Abbreviated accounts usually consist of an abbreviated balance sheet and notes. They do not include a profit and loss account.
How do I change the Company's Accounting Reference Date?
In order to change a company's Accounting Reference Date the following two steps are necessary:
- the board of directors (or if the company has only one director that director) should resolve to change the Accounting Reference Date and record that resolution in writing; and
- a change of accounting reference form (Form 225) should be completed and filed at Companies House.
We can provide all of the documentation and make the appropriate filing on your behalf.
If you are interested in this then please contact us.
What is a 'small company'?
'Small' companies can actually be quite large. A small company satisfies at least two of the following:
- an annual turnover of no more than £6.5 million;
- a balance sheet total of no more than £3.26 million;
- no more than 50 employees (on average).
However, please note that the following types of company are not allowed to prepare small company accounts, even if they are 'small':
- companies with shares or debentures listed on a stock exchange;
- certain types of financial service company (including banking and insurance companies); and
- any company in a group with any of the above types of company.
What is the advantage of being a 'small company' for accounting purposes?
Small companies may prepare simpler, less detailed accounts than larger companies. These accounts are known as 'small company accounts'.
Small companies may also file an abbreviated version of their accounts at Companies House.
Is my company in a group of companies?
If all of the shareholders of your company are individuals (as opposed to companies) then your company is not a subsidiary.
If your company does not own shares in any other company then it is not a parent company.
If your company is neither a parent or a subsidiary company then it cannot be a member of a group of companies.
In more detail
Your company may be in a group of companies if:
- the majority of its shares are owned by another company (or it is otherwise controlled by a company); or
- it owns the majority of shares in another company or companies (or otherwise controls those companies).
Groups of companies are obliged to draw up accounts showing the financial performance and activities of the entire group in the accounting period. They will show, for example, the total turnover and expenses of the group.
However, Small groups are not obliged to prepare group accounts.
Small groups meet at least two of the following conditions:
- group turnover less than £6.5 million net (£7.8 million gross);
- group balance sheet total £3.26 million net (£3.9 million gross); and
- total number of employees less than 51 (on average),
Also, no member of a Small group can be:
- a PLC;
- a company with shares or debentures listed on a stock exchange; or
- certain types of financial service company (including banking and insurance companies).
What happens if a Company fails to file accounts with Companies House?
Failure to file accounts is a criminal offence. The directors and the company may be prosecuted.
There are also civil penalties imposed when accounts are filed late, or not at all.
Do I need to have my company accounts audited?
Small companies do not have to have their accounts audited provided that they have:
- an annual turnover of no more than £6.5 million; and
- a balance sheet total of no more than £3.26 million,
and are not:
- a PLC (unless a dormant PLC);
- a member of group of companies (unless it is a small group see above);
- certain types of financial services company (including banking and insurance companies); or
- certain trade unions and employer associations.
Please note that a flat management company may be required to have its accounts audited pursuant to the leases of the flats it manages.
If a company is not required to have its accounts audited it can submit unaudited accounts to Companies House.
Can shareholders demand an audit?
Yes. The shareholders of the company have the right to demand that the accounts of the company be audited.
The demand needs to made by a shareholder, or shareholders together, holding 10% or more of the shares in the company.
What happens if my accounts are rejected by Companies House?
Companies House will send a notice requiring the company to amend and resubmit its accounts within 14 days. If the company does not resubmit the accounts within this time Companies House will treat the company as if it had not submitted accounts.
If the company is treated as not having submitted accounts then the deadlines for filing will continue to run. The company should resubmit the accounts as soon as possible, and certainly before the filing deadline.