Compiling year- end accounts is an essential process that all limited companies in the UK must go through annually.
The steps involved are compiling the financial information for the past 12 months related to business activities and filing them with HMRC and Companies House. Failing to do this by the deadlines imposed can result in large fines.
This article is a comprehensive guide on how to complete your company’s year-end account before the deadlines. We also discuss how to send the required documents and possible fines for a late submission.
What Does Completing Accounts Year-End Mean?
Completing accounts year-end is to compile the annual financial information of your company into a set of statutory accounts. The final document must contain your income statement, balance sheet, director’s report and important footnotes. It is necessary to finalise the documents and file them to both HMRC and Companies House before the deadline.
Who Needs to Do It?
It is the responsibility of the company directors to complete accounts at year-end even if an external accountant is involved. Their duties involve promptly gathering the necessary information and ensuring strict compliance with the law. This overall process is supervised by the director of the limited company. Remember that a limited company is one with shareholders having limited liability.
When Does it Need to be Done?
The usual deadline to complete accounts year-end is 12 months after the company’s financial year-end. Most businesses use the calendar year to calculate this date. For instance, a company with a financial year-end of 30th June 2023 has to complete its accounts for that year-end by 30th June 2024.
What You Need to Send
The following are the essential documents to send to HMRC and Companies House at your company’s year-end. VAT-registered businesses should also send a copy to the HMRC’s VAT division.
- Company Tax Return – This is a document that summarises a company’s income and expenditure for that annual calendar period. The company tax return helps to calculate the amount of corporation tax you owe HMRC.
- Statutory Accounts – These refer to the compilation of a company’s income statement, balance sheet, and director’s report. A comprehensive statutory account should also contain footnotes for additional explanations of the finances of the company accounts. The balance sheet must reveal the equity or net assets of the company while the director’s report summarises the company’s performance (profits and losses) for that financial year.
All of these documents must be sent to HMRC, Companies House, and (if you’re VAT registered) HMRC’s VAT division.
When to File Your Company Tax Return with HMRC
The deadline to file your company tax return with HMRC is nine months from the last company’s financial year-end. A company with 30th June as its financial year-end has to file a tax return by 31st March of the following year.
When to Send Your First Accounts to Companies House
Companies less than 12 months of inception are not mandated to send year-end accounts to Companies House. However, they must file a confirmation statement to prove their records are up-to-date.
This changes immediately such companies become more than 12 months old. It becomes mandatory to send their first set of accounts to Companies House within 21 months of incorporation. A company that was incorporated on 30th June 2021 is required to send its first accounts by 30th March 2023.
When to File Subsequent Annual Accounts with Companies House
Business owners must file their company’s annual accounts with Companies House within nine months of ending their financial year. That means a company with 30th June as the financial year must file its report by 31st March the following year.
Any company that fits the below description is not to send annual accounts to Companies House.
- Your company is dormant (no activity)
- Your company doesn’t have any shareholders
- Your shares are held by a nominee shareholder
- You’re a private company that is exempt from audit
Understand that private companies exempted from audits do not need to file annual accounts with Companies House. However, they must file confirmation statements that confirm their records with Companies House.
When to Pay Corporation Tax to HMRC
The deadline to pay corporation tax to HMRC is calculated as nine months and one day from the end of a company’s financial year. A company with a financial year of 30th June is to pay the corporation tax bill before 31st March of the following year.
How Much Are Fines for Missing the Deadline?
HMRC has penalties for companies that miss the deadline for completing their year-end accounts or filing company tax returns. The penalty fees depend on the extent of lateness but generally follow these guidelines:
- 1 – 3 months late – £375
- 3 to 6 months late – £750
- Over 6 months late – £1,500
What if you Know You’re Going to be Late?
Different factors could contribute to a late submission of your company’s year-end accounts. What should you do when you discover you might submit a late tax return document?
The simple answer is to immediately inform HMRC. Explain the difficulties you experience and ask for guidance or possible assistance from HMRC concerning the deadline. You might not get fined if the problem is reasonably understood.
Reporting VAT Returns
Every VAT-registered company is to file a return with HMRC every quarter. The deadline for filing these VAT returns is a month from the end of the last quarter. That implies a company with a financial year-end of 30th June must file a VAT return by 31st October for July – September. Similarly, the same company files additional quarterly returns by the 28th of January (for October – December), the 31st of April (for January – March), and by the 31st of July for (April – June).
Filing Your Confirmation Statement
You must file a confirmation statement with Companies House every 12 months. The confirmation statement is a document that confirms your records are updated and must be submitted before the annual deadline.
This deadline is calculated after a year and two weeks from the last deadline or incorporation date of your company. For example, a company incorporated on 30th June 2021 must file its confirmation statement by 14th July 2022.
The submitted document must reflect every change that has occurred within the company since the last confirmation statement. It is to help Companies House update your details with them. You can also fill out a Change of Details form and submit it to Companies House.
What Change of Details do you Need to Report?
The following are examples of the type of changes to include in a typical confirmation statement to Companies House:
- Change of registered address
- Change of director(s)
- Change of company name
- Change of company type
- Transfer of shares
- New shareholders
It is important to notify Companies House of changes to these details since they appear on their public register. The same holds for a company that gets dissolved. You must officially inform Companies House through a Final Confirmation Statement.
What Happens if You Don’t File Your Confirmation Statement?
There is a penalty fee for refusing to file your confirmation statement. The fine could be up to £500 with an option of getting struck off the public register of Companies House. In other words, your business might cease to officially exist.
This can be avoided by promptly filing your confirmation statement before expected deadlines. Consider talking to an advisor or a Companies House agent for guidance on filing the required documents.
Who Can Help With Your Year-End Accounts?
Scheduling a consultation session with any of the listed professionals below can speed up the process of compiling your year-end accounts.
An Accountant
You can hire an accountant to prepare the official year-end accounts and file them with HMRC. A qualified accounting professional can also oversee the process of filing the company’s tax return and payment for overdue corporation tax. This explains why some limited companies have an in-house accountant to promptly file documents with HMRC.
A Tax Lawyer
Consider setting up a consultation with a tax lawyer for better knowledge of tax implications for your business. Tax lawyers are particularly helpful for settling issues with HMRC or when trying to minimise overall tax amounts. Their roles become more prominent as your business expands with more complex tax affairs.
A Financial Advisor
Having a financial advisor is excellent for a proper understanding of your business finances and better decision-making. Financial advisors are professionals with experience in setting up financial systems and processes capable of accelerating business growth. They are necessary for navigating complex financial situations either as a small company or large business.
Other professionals worth contacting for help with compiling year-end accounts include::
HMRC
HMRC is a government agency in charge of collecting tax return forms and self-assessment documents. They also guide businesses with questions concerning taxation processes and compliance issues. We encourage business owners to not hesitate to contact HMRC if there is a delay with filing their year-end accounts. Explaining the situation to them might save you from paying the penalty fees for late submissions.
Companies House
Companies House is responsible for keeping a public register of companies that file their confirmation statement and annual accounts with them. Hence, it is important to contact them about changes in essential company details. You should also inform Companies House if there is a delay with filing the required documents.
Any of the above professionals can offer some guidance on how to compile year-end accounts. They have their specialised responsibilities and unique advantages if you require their services. HMRC and Companies House might be a good starting point considering they offer free assistance with meeting their requirements.
Top Tip for Completing Year-End Accounts
Completing the year-end accounts of your company before the stipulated deadlines is important to avoid paying fines or penalties for late submissions. The following are useful tips to consider:
Start Early
The most important advice is to start early. Do not wait until the deadline is close before you start compiling the year-end accounts of your company. Late filing of documents is stressful and can cause mistakes with submitted documents. Early preparation is best to gather necessary information and accurately file your returns.
Keep Your Paperwork in Order
Another valuable piece of advice is to properly document every piece of paperwork. Otherwise, you will struggle to find them when it is time to prepare company accounts for the year. Stored paperwork can also be used as evidence if an issue with HMRC arises.
Chase Payments Owed to You
Send reminders to customers who are yet to pay for delivered goods and services. Contact them and try to understand the reasons for the delay because owed payments affect your business cash flow. It also affects the balancing of your financial account sheets.
Claim Your Expenses
Another strategy to help when compiling year-end accounts is to check for eligible deductions you left unclaimed. Eligible claims depend on the nature of your business but are a useful strategy to minimise payable tax. Common expenses you might be entitled to make claims for include:
- Travel expenses
- Staff costs
- Premises costs
- Equipment costs
Double-Check Your Financial Records
One advantage of early compilation and filing of financial records is the chance to double-check the documents before the final submission. Double-checking is to minimise the possibility of errors and ensure only updated information is provided. A good idea is to hire a professional accountant or financial advisor to check through the financial records.
Organise Your Employee Records
Failure to organise employee records can cause delays in compiling year-end accounts of the company. It is important to have a defined employee record that contains essential information like payroll data and employee contracts. An organised employee record makes it possible to track hours worked and ensure the payment of correct wages. HMRC might also request this record to verify your compliance with employment law regulations.
Backup Your Data
Proper record-keeping practices and having an organised database of business financial information are only valuable when backed up. Ensure you backup essential information in secured drives that remain accessible whenever you need them. This is excellent advice for self-employed people that probably keep all company records alone.
Final Thoughts
Completing the year-end accounts for companies is a complex process in the UK and we advise business managers to start the process early. HMRC and Companies House have penalties for late submissions and early preparation helps to avoid that.
Start by having an organised financial record throughout the year and tracking liable taxes. You should also consider consulting an accountant or tax advisor if you have questions. Alternatively, discuss with HMRC or contact Companies House for guidance on compliance with relevant tax regulations. You must also inform them about changes in your records or possible delays with the filing of your financial accounts.
