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If you have recently setup a new limited company or are thinking of doing so, then one of the areas that you need to be aware of is the accounts and tax filing regime for companies.
After the end of its first financial year, a private limited company must prepare annual accounts (often referred to as statutory accounts) to be sent to Companies House and a Company Tax Return (CT600) to send to HMRC. It is sometimes recommended to align your accounting year with the personal tax financial year.
Annual (Statutory) Accounts
Annual accounts are effectively a statement of a company’s financial activity and position over the last financial year. The information contained within the annual accounts will also be used to help prepare a Company Tax Return for HMRC and estimate how much Corporation Tax is owed.
This means that your first set of accounts usually covers more than 12 months. This is because they:
- start on the day your company was set up (‘incorporated’)
- end on the ‘accounting reference date’ that Companies House sets for the end of your company’s financial year - this is the last day of the month your company was set up.
So, for example, if a company is incorporated on 10 March 2021 then its accounting reference date will be 31 March the following year. The March 2022 accounts will be due for filing by 10 December 2022. This means that your company’s first accounts must cover roughly 12 months and 3 weeks.
This deadline is because the deadline for filing your first set of annual accounts with Companies House is 21 months after the date your company was registered with Companies House.
Going forward, annual accounts must be submitted 9 months after the company’s financial year ends. So, using the example above the company’s March 2023 accounts (for year ending 31 March 2023) will be due for filing by 31 December 2023.
Statutory accounts must include:
- a ‘balance sheet’, which shows the value of everything the company owns, owes and is owed on the last day of the financial year
- a ‘profit and loss account’ (unless exempt), which shows the company’s sales, running costs and the profit or loss it has made over the financial year
- notes about the accounts, usually made by your accountants.
- a director’s report (unless you’re a ‘micro-entity’)
- an auditor’s report (this depends on the size of your company).
Certain businesses might be able to send simpler (‘abridged’) accounts to Companies House and not file the profit and loss account nor does it need to be audited. This depends on whether your company is dormant or qualifies as a small company or ‘micro-entity’.
According to the official Government guidance a company will be considered small if it meets two of the following three conditions:
- has an annual turnover of £10.2m or less
- has £5.1m or less on its balance sheet
- has 50 employees or less.
If a company is small, you can:
- use the exemption so your company’s accounts do not need to be audited
- choose whether or not to send a copy of the director’s report and profit and loss account to Companies House
- send abridged accounts to Companies House.
Sending Abridged Accounts
You can only send abridged accounts if all your company members agree to it.
Abridged accounts must contain a simpler balance sheet, along with any notes. You can also choose to include a simpler profit and loss account and a copy of the director’s report.
The balance sheet must have the name of a director printed on it and must be signed by a director.
Sending abridged accounts means less information about your company will be publicly available from Companies House.
A company will be considered a micro-entity if it meets two of the following three conditions:
- turnover is £632,000 or less
- balance sheet total is £316,000 or less
- average number of employees is no more than ten.
If your company is a micro-entity, you can:
- prepare simpler accounts that meets the statutory minimum requirements
- send only your balance sheet with less information to Companies House
- benefit from the same exemptions available to small companies.
Company Tax Return
A Company Tax Return must be submitted using HMRC’s Company Tax Return form (CT600) or another approved method. The main CT600 guide includes detailed instructions for completing the Company Tax Return CT600 form. HMRC uses this information to calculate how much you owe in Corporation Tax.
The period covered by your Company Tax Return also known as your ‘accounting period’ for Corporation Tax cannot be longer than 12 months.
This means that you may have to file 2 tax returns to cover the period of your first accounts. If you do, you’ll also have 2 payment deadlines.
If you started trading on the same day your company was set up then you file your first tax return to cover the company’s first 12 months. Using the example above, your first tax return would cover the period from 10 March 2021 to 9 March 2022 (payment due by 10 December 2022). A second tax return would then need to be completed for the period from 10 March 2022 to 31 March 2022 (payment due by 31 December 2022).
In subsequent years, you would usually complete your tax returns for the period from 1 April to 31 March. This will typically cover the same financial year as your accounts.
There is a fixed date for the payment of Corporation Tax which is 9 months and 1 day after the end of the relevant accounting period. Note that a company is usually required to pay the tax due in advance of the filing deadline for a company tax return.
Online Corporation Tax filing is compulsory for company tax returns. Company tax returns have to be filed using the iXBRL data standard using either HMRC’s own software or third-party commercial software.
The accounting period for Corporation Tax is normally the same 12 months as the company financial year covered by the annual accounts.
The Company Tax Return (CT600) must include the company’s self-assessment return alongside details of any trade and other losses such as capital losses.
The following must also be included with the return:
- Accounts drawn up under UK company law.
- Computations showing how the figures in the return have been calculated from the figures in the accounts.
- Other documents required under company law such as Directors’ and Auditors’ reports.
- All required supplementary pages such as for loans to participators in close companies and controlled foreign companies.
Corporation Tax Payments
All Corporation Tax and related payments must be made electronically and there are special rules for companies with taxable profits over £1.5m.