Corporation Tax Returns
Annual Accounts & Corporation Tax Returns
Also commonly referred to as ‘Statutory Accounts’ or ‘Year-end Accounts’, Annual Accounts must be submitted by all Limited Companies in the UK within 9 months after the company’s year end to the Companies House and Corporation tax return must be submitted within 12 months after year end.
Failure to file confirmation statements, annual returns or accounts is a criminal offence which can result in directors being fined personally in the criminal courts. Failure to pay the late filing penalty can result in enforcement proceedings.
- Full Accounts
As the name suggest, Full Accounts must include all the key reports such as a profit and loss account, a balance sheet account and detailed notes to the accounts. In addition to this, full accounts must also include an accountant’s report and a director’s report. Both of which provide further important information about the company. - Abridged accounts
Companies that meet the Small Business or a Micro Entity criteria, can send a more summarised version of full accounts called the ‘Abridged Accounts’. Abridged accounts provides less information about the company to the public and has a simpler balance sheet, they only need to include the Balance Sheet and a reduced number of notes to the accounts. They do not include the profit and loss account. These can be useful if you are trying to hide details about the business such as the gross margins or the profits the business made during the year. - Dormant Accounts
If your company has not had any major or considerable transaction in the past financial year, then Companies House will consider it a dormant company. Major transactions are required to be reported. If your company has not made any such transaction, then you will be categorized as a dormant company.
What does it include;
Statutory Accounts prepared for Limited Companies in the UK must be fully compliant with IFRS (International Financial Reporting Standards) or the UK GAAP (Generally Accepted Accounting Practice). These will typically include the following;
Profit & Loss (P&L) Account
Profit & Loss (P&L) shows the performance of a business in a given period of time. It would typically show a summary of Income received and types of expenses incurred.
However, every business is unique, a retail business for example with multiple stores may want to see Income & Expenses split by each store, whereas a construction business may want to see profitability of each project it undertakes.
P&L produced for management should therefore be tailor made keeping in mind the nature of business, the level of granularity required, the frequency and the layout.
Balance Sheet
A Balance Sheet shows the financial position of a business at any given point in time. A Balance Sheets should be prepared with notes to help indicate key business ratios, such as liquidity ratios, debtor days, inventory days etc to highlights areas of risk and better plan for cashflow.
Key Performance Indicators (KPI’s)
Notes to the accounts shed light on key pieces of information that would be useful to any stakeholder of the business. Typical examples of these would include things like;
- Breakdown of Fixed Assets to show amounts purchased, sold and depreciated
- Related Party Transaction during the year
- Detail of some of its creditor or debtors e.g. money owed broken between the bank, taxman or a director
Directors Report
Companies Act 2006 requires all larger companies to produce a Directors Report in their Annual accounts to improve corporate transparency. It talks about the business’s principal activities, any significant events that incurred during the year and its business impact.
The report is an opportunity to provide greater detail to its readers about how the business performed during the year, any regulation impacts or change in economic outlook. It may also talk about dividends the business intends to pay.
Auditors Report
Auditors Report is only required for Companies carrying out an Audit (whether Compulsory or Voluntary Audit). An Auditors Report is provided by the Company’s auditors, with their opinion on whether the Accounts show a true reflection of the business.