If you have a limited company, then it is important that you should prepare your company accounts since this is a legal requirement. Unfortunately, this can be an intimidating task to accomplish. The following is an outline of what you need to do.

Company accounts consist of your company tax return as well as your complete annual statutory accounts. Statutory accounts refer to the yearly financial records prepared by your company at the end of every financial year. These records will be distributed to the Companies House and to HMRC to be used for your tax return.

It is essential to understand when limited company accounts must be delivered to Companies House. It is important to remember that once you file your accounts with Companies House, they will become publicly available.

Generally, for private companies, the time allocated for sending the company accounts to Companies House is nine months starting from your ARD (Accounting Reference Date).

When you are starting a company, the date of incorporation will be the beginning of your financial year and the ARD is automatically set as the first anniversary of the last day in the month in which the company was incorporated. If you are wondering what ARD means, it means the end of your financial year. Your annual accounts will be prepared to this same date every year.

For example, if your company was incorporated on 06 July 2018, then this means that your first ARD would fall on 31 July 2019. Subsequently, each year’s accounts must be filed for the financial period ending July 31st.

In other words, your first company accounts must be filed within 21 months of the date of incorporation. This deadline is set by Companies House.

Failure to file company accounts on time can result in unwanted late filing penalties. Late filing penalties were introduced to encourage directors to file their accounts and reports on time as this information is required for the public record. The level of the late filing penalty is dependent upon how late the accounts are when they reach Companies House.

If you are less than one month late in filing, then you will incur a fine of £150. Late filing penalties increase over time. For example, if you are more than six months late in filing, then you will incur a penalty in the sum of £1,500.

A company tax return is filed with HM Revenue and Customs each year, it reports on the company’s earnings, losses, loans, and any other contributing factors that relate to the company’s tax liability. The deadline to file a company tax return is 12 months after the end of the accounting period. Again, if this is not filed on time, penalties for late filing will be incurred.

There is a separate deadline for paying Corporation Tax, or informing HMRC that your company has zero liability, this is nine months and one day after the end of the accounting period for your Corporation Tax.

You will be using your company tax return and company accounts to determine the amount of Corporation Tax that you need to pay. However, it can be a bit confusing since the due date of your corporation tax payment is ahead of your company tax return.

Generally, statutory accounts consist of a balance sheet, a profit and loss account, as well as notes pertaining to the accounts. A balance sheet indicates everything that the company owes, is owed, and owns. A profit and loss account indicates the running expenses, sales, and any profit or loss obtained by your business over a certain financial period. Depending on how big or small your business is, you might also need to prepare an auditor’s report or a director’s report. However, if the government considers your business as a micro-entity or a small company, then you might be able to deliver simpler “abridged” company accounts to Companies House that do not require any auditing.

Your company will be considered small if its turnover is £10.2 million or less, your employees are 50 or less, and your balance sheet shows £5.1 million or less.

Your company will be counted as a micro-entity if its turnover is £632,000 or less, your employees are 10 or less, and your balance sheet indicates £316,000 or less.

Micro-entities and small businesses are allowed to use an exemption so that there is no need for an audit on their accounts. You can decide whether you want to send a copy of your profit and loss account and director’s report. You could have a simpler balance sheet.

Micro-entities can choose to have simpler accounts that satisfy the statutory minimum requirements, and only deliver their balance sheet to Companies House.

It is important that statutory accounts must be able to satisfy the accounting standards, either the New UK Generally Accepted Accounting Practice or the International Financial Reporting Standards.

Running your own business is extremely rewarding, but at the financial yearend, things can sometimes become stressful and time-consuming, especially if you are not a competent accountancy professional trying to compile a set of accounts.

If you are a small company or a micro-entity, then you can opt to prepare your own accounts for your limited company. It is not essential that an accountant file your accounts, but it is highly recommended.

On the face of it, it may seem simple to compile a set of company accounts, but you must be competent in doing so as mistakes can lead to serious penalties and increased tax liabilities.

Unfortunately, it is the law that accounts must be filed each year, and it is important that the information filed is accurate and on time. It is important to instruct the right accountant who will ensure that all the legal requirements are satisfied and that the company’s accounts meet the accounting standards. In turn, this will not only help to relieve your stress levels, but provide you with peace of mind that your accounts have been filed accurately and on time, avoiding any potential penalties.