Company Accounts and Corporation Tax Returns

Running a business is made up of many elements, one of them being the filing of your annual company accounts and corporation tax at both Companies House and HMRC. This is a legal requirement regardless of whether you make a profit, a loss or the company is not trading – there are no excuses!

But what is the purpose of these accounts and why should you do them?

The simple answer is that by working with your accountant, the accounts can become a critical part of your business and the sooner after your accounting period ends these can be completed, the more useful the numbers become. This can assist with financial planning, cashflow and generally having a good ‘hands-on’ feel.

This is where the importance of an accountant becomes evident – here at Kennedys Accounting we want to work with our clients to provide a timely service to ensure that not only do you meet your legal obligations, but you also understand the various reports that your accountant will create.

This page not only talks you through these reports, but works as a reference point. It explains what is included in your accounts and where they are filed, as well as how you and any other directors or shareholders in the business can use the information.

Limited company accounts are made up of 4 sections which are explained below;

1. Directors’ report

This report is a narrative section, it does not contain any figures. It gives the directors the opportunity to remind shareholders or the board of the main activities of the business and update them on the company’s performance over the period concerned.

In this section, you should list the names and responsibilities of directors who held office during the reporting year. Individual directors may also wish to include reports on their own areas of responsibility.

The report should be discussed at a board meeting and approved by the board, before being signed by a director with the appropriate authority. The signing of the accounts would also be noted in the company board minutes.

2. Balance sheet

The balance sheet is a set of figures, under various headings that puts a value on everything the business owns.

This also details any payments to be made as well as any money owed by debtors that were due by the last day of the financial year covered by these accounts.

Once the company is in its second year of trading, the balance sheet includes two sets of figures so that a year-on-year comparison can easily be seen, with one column for the current reporting year and one for the previous accounting year.

There are also numbers on this page, under a heading called ‘notes’. The numbers correlate with the notes pages to give explanations.

This page needs to be signed by an authorised director as part of the agreement of the company accounts

The usual main items to include on the balance sheet are:

Tangible assets – this includes cash, any inventory, vehicles, equipment, buildings and investments
Year-end stock value
Money owed by debtors
Cash in bank accounts and in hand
Money owed by creditors that will fall due within one year
Value of net current assets or liabilities
The total of assets less current liabilities
Provision for liabilities
Value of net assets
Value of capital, reserves and any called-up share capital
Value of shareholders’ funds

3. Profit and loss account

The profit and loss account is effectively a page in the company accounts that shows the sales the company has made, followed by the expenditure. Once the latter is deducted from the former, you will easily see if the company is in a profit or a loss position for the company year.

The figures in the profit and loss account include:

Turnover (Sales)
Cost of sales
Gross profit
Other income
Expenditure
Corporation Tax due
Profit for the reporting year

4. Notes for the financials

Notes for the financials is a section of the annual company accounts that provides additional detail and context to certain figures, usually in the balance sheet.

In addition to information on the accounts, the ‘notes’ must include the following:

How turnover and depreciation are represented in the accounts
The accounting principles used
The basis of preparation

How your company accounts are filed…

Once you have spoken with your accountant and the accounts are agreed, the company accounts are filed. Your accountant will file an abbreviated version of your accounts at Companies House and the company tax return at HMRC.

Deadlines for filing accounts and Penalties

Every limited company will have their own date for filing the company accounts. The due date is usually determined by the date the company was registered with Companies House.

It is possible to change the dates for your company filings – talk to your accountant about this, for instance, some businesses like to run on a calendar year!

Established businesses need to file their accounts at Companies House 9 months after the company’s financial year ends.

The dates for filing accounts with HMRC are different. You must file your accounts when you submit your Corporation Tax return 12 months after the end of your accounting period, although usually the 2 are filed at the same time.

If you do not file your accounts with Companies House by the deadline, they will automatically issue a penalty notice as follows.

Up to 1 month £150

1 to 3 months £375

3 to 6 months £750

More than 6 months £1,500

The penalty is doubled if your accounts are filed late two years in a row.

Who is responsible for filing company accounts?

Company directors usually appoint an accountant to prepare and file their accounts at Companies House and HMRC on their behalf. However it is still the responsibility of the directors to ensure that they provide the accountants with all the information in a timely way in order for them to complete the work and discuss with the directors prior to filing.

The responsibility remains with the directors to ensure that the accounts are filed on time. Failure to comply will lead to penalties as outlined above. If there is a serious breach, the company may be struck off the Companies House register.