How to complete your limited company’s year-end accounts

Year-end accounts are a legal and often daunting requirement for limited company Directors to complete and file, but they don’t need to be! We’ve summarised the basic requirements for year-end accounting, so you know what you need to do to prepare.  

What is a year-end for a limited company?

Every limited company has its unique financial year, and the year-end is the completion of that accounting period. Your company’s year-end accounts are essentially a summary of your business’s overall performance for the accounting year.

The year starts on the date the company started trading (specifically when you registered with Companies House), so the year-end falls on the day before that date the following year. If you are unsure on your year-end date, the easiest way to find it out is to look up your company records on Companies House.

If this is the first time you are submitting a year-end company account, you may need to submit a few more months than your 12-month year-end accounts. If this is the case, you’ll need to submit an additional tax return to cover the extra time.

How to prepare for your company year-end accounts

There are some simple steps you can take to prepare for your year-end financial reporting:

Get your expenses in order

The general rule of thumb is that you can claim expenses if they are incurred solely for businesses purposes. By claiming legitimate business expenses, you can reduce your overall business profits which means less Corporation Tax will be due.

Make sure your books are accurate and up-to-date

If your accounts are not up-to-date or you have outstanding invoices, your year-end company accounts will not be accurate and will produce skewed figures. Make sure that all the figures in your accounts and tax returns match the figures in your supporting documents (invoices, bank statements, etc.). Also, make sure any sales that have been made but not yet paid for are listed as outstanding debts owed.

Always make a backup

Year-end reporting involves a lot of data and collating of information. As a result, make sure you take regular backups. This way if any data gets lost, you can pick up from where you left off.

What information do you need to report to HMRC?

Year-end financial reporting involves sending key information about your companies accounting period to HMRC and Companies House. You must send your Company Tax Return to HMRC and your Statutory Accounts to Companies House.

Company Tax Return

Shortly after your year-end, HMRC will issue a “notice to deliver a tax return”. Your Company Tax Return (CT600 form) is filed online and contains details of your company’s turnover, minus tax allowances and expenses, profit and other information. HMRC will then use this information to calculate your Corporation Tax Liability.

Statutory Accounts

Statutory accounts (also referred to as annual accounts) give an overview of the company’s financial activity over the year. Statutory accounts must include:

• Income statement – the company’s profit and loss for the accounting period.
• A balance sheet or statement of financial position – this reports your business’s assets and liabilities at the end of the accounting period.
• Directors report – a report on the state of the company by the director(s).
• Footnotes – this can include any additional information to clarify the other sections.

If you are a small company or micro-entity, you may be able to send ‘abridged’ accounts to Companies House.

The balance sheet, or statement of financial position and footnotes, is published by Companies House and can be viewed by the general public.

When and how to file your year-end accounts?

It’s essential to file your year-end accounts before the deadlines to avoid a late filing penalty. The deadlines to make a note of are:

• Your first accounts need to be filed to Companies House 21 months after the company’s registration date.
• Subsequent annual accounts need to be filed to Companies House 9 months after the end of your company’s financial year.
• Pay Corporation Tax to HMRC (or let them know there is no Corporation Tax due) 9 months and 1 day after the end of your accounting period.
• File your company’s Tax Return to HMRC 12 months after the end of your accounting period.

As part of the package of measures introduced to support businesses throughout the COVID-19 pandemic, HMRC announced that from 27^th June 2020, companies would have an extension to their accounts filing deadline. The filing deadline is extended if your year-end falls between the 27^th June 2020 and 5^th April 2021. Therefore, the deadline for filing accounts to Companies House has been extended to 12 months – instead of the usual 9 months.

What happens if you miss the deadline?

If you miss a deadline for submitting the required documents to HMRC or Companies House, you may be liable for paying the penalty. You must take your obligations seriously as you will receive an automatic penalty notice if you are late in filing your accounts and your company can even be struck off the register. Depending on how late your accounts are will depend on the fine you will have to pay, as shown below:

• Up to 1 month – £150
• 1-3 months – £375
• 3-6 months – £750
• Over 6 months – £1,500
• Over 2 years in a row – penalties will double

What other reporting duties are there?

Although these are not included as part of your year-end accounts, they can complete at the same time for convenience. These include filing your company’s VAT return (if applicable) and a confirmation statement. It is a legal requirement for you to confirm your company’s information on an annual basis to Companies House, even for a dormant company. The confirmation statement must be filed with 14 days of its due date, which is a year after incorporation, or a year after the date of the previous report.

Enlist the help of an experienced contractor accountant

The easiest way to ensure your year-end accounts are filed on time and accurately, is to engage with an experienced accountant. Founded in 1998, Churchill Knight & Associates Ltd has helped over 20,000 contractors with their limited company accountancy. We have carefully constructed our limited accountancy packages to suit contractors and freelancers at each career stage, and we look forward to supporting you throughout your contracting career. For more information about our services, please give our expert team a call on 01707 871622, or request a call for a time that suits you.