Running a limited company in the UK comes with many responsibilities, including preparing company accounts. Also known as statutory accounts, company accounts are full annual accounts and tax returns for your company. You must file them after the end of every financial year (a 12-month period that ends on the accounting reference date ARD), and send them to shareholders, Companies House, and HMRC (as Company Tax Returns).

Whether you make a profit or loss or are trading or dormant, preparing and filing these accounts on time is a legal requirement. Besides being a legal requirement, statutory accounts help shareholders understand your company’s performance by offering all crucial data in one place.   

Preparing these accounts can be daunting; even the slightest error can cause penalties or lead to HMRC investigations. Therefore, our tax specialists in London have prepared a detailed guide explaining what you need to include in your accounts, how to file them, and when.

What are Statutory Accounts

Statutory accounts are also referred to as company accounts, financial accounts, or annual accounts. They provide an overview of a company’s financial activity over a specific period, usually 12 months of a financial year. These accounts contain financial records and statements that offer comprehensive information about an organization’s operating performance and transactions, determining its financial position at the end of the year.

A limited company is required to deliver these accounts to:

  • HMRC as Company Tax Return
  • Companies House
  • Company shareholders
  • Holders of the Company’s Debentures
  • Those entitled to attend general meetings

Preparing Statutory Accounts

To prepare annual accounts, you need financial data such as assets, liabilities, income, expenses, and equity. According to the Companies House, statutory accounts include the following:

Profit and loss account

  • Balance sheet
  • Notes supporting the accounts
  • Director’s report
  • Auditor’s report (small and micro-entities can be exempted from the audit report; we will discuss this in detail later)

Profit and Loss Account

The profit and loss account contains all transactions during the year, showing whether your company made a profit or loss. It includes the company’s turnover or income after deducting the cost of sales and other business expenses like rent, loan repayments, interests, utilities, wages, pensions, VAT, and Corporation Tax. The final figure will show how much profit or loss your company made over a financial year. The dividends from the profit will go to the shareholders, and any remaining amount can be reinvested in the company.

Balance Sheet

The balance sheet is also known as a financial statement that represents your company’s assets, liabilities, and shareholders’ equity at the year-end. This data tells how much your business owes, owns, and is owed, so you can understand its value and financial health while preparing these accounts.

Assets include anything your company owns, including property, land, equipment, machinery, furniture, materials, cash, bank money, vehicles, and accounts receivable (the amount your customers owe you).

On the other hand, liabilities tell what your company owes others; it can be either money or other obligations. They include loans, taxes, accounts and dividends payable, accrued payroll, expenses, mortgages, customer deposits, etc. If your liabilities are more than your assets, it shows that your business isn’t doing well.

The balance sheet helps the authorities understand your company’s value, financial stability, liquidity, and borrowing commitments.

Tax accountants are working on financial calculations

Notes Supporting the Accounts

You also have to provide supplementary information to support the accounts you’re submitting in the form of notes. Some of these notes are a part of accounting principles and law requirements, while others help clarify entries in the balance, profit, and loss sheets and support future performance estimates.

Director’s Report

The director’s report is a financial document prepared by your company’s board of directors and is a part of statutory accounts. This report is mandatory for large companies, but some small and micro-entities are exempt from this requirement.

The director’s report summarises and contextualises your company’s current performance, and financial position, prospects, and proposed strategies. This helps others understand your business’s viability and overall financial health. Here’s what this report generally includes:

  • Names of your company’s directors during the financial year of the annual accounts
  • Summary of its financial position during the financial year
  • Company’s performance analysis within its market
  • Current state and future viability of its market
  • Description of the principal business objectives, activities, and strategy
  • Prospects and developments
  • Factors or trends that may affect the company’s financial position, performance, or development in future
  • Principal risks or uncertainties your business faces, along with an explanation of how the directors assessed the prospects, uncertainties, and risks
  • Company’s capacity for growth and expansion
  • Explanation of how you’re managing opportunities and challenges
  • Significant changes to the company’s fixed assets
  • Any significant financial event(s) that has an impact on your company (occurred after the date mentioned on the balance sheet)
  • Dividend payments recommendations
  • Specifying if all the directors are complying with necessary standards, responsibilities, and regulations

This shows that the directors’ report holds a valuable position in the company accounts because it offers corporate transparency that helps company members make informed decisions. With this report, they can assess the directors’ performance and ensure your business is well-managed.

The Auditor’s Report

An external, qualified chartered accountant or auditor prepares this report, where they offer an independent evaluation of statutory accounts. The report gives a transparent, unbiased, and honest opinion on the annual accounts’ “truth and fairness”. These reports generally include:

  • The auditor’s responsibilities
  • Company directors’ responsibilities
  • Specifying the accounts are prepared according to the UK Generally Accepted Accounting Practice (GAAP) and comply with the Companies Act 2006
  • Specifying the authenticity of financial statements and whether they give a fair view of the assets and liabilities of the company
  • Any additional information

Limited companies must provide an auditor’s report along with statutory accounts. Some small companies can qualify for audit exemption. You can qualify for exemption if your annual turnover is less or equal to £10.2M, assets worth £5.1 million or less, or have 50 or fewer employees. You qualify as a small company by meeting any two of these conditions.

Situations where you must submit an audit report, even after meeting the requirements of exemption:

  • The company’s articles of association mention the accounts must be audited
  • The company’s shareholders (who own 10% or more of the shares) request an audit

Simplified Accounts for Small, Micro, and Dormant Companies

Small, micro, and dormant companies can prepare simplified accounts where they don’t have to disclose complete financial information on the public register. They still have to submit full statutory accounts to the Companies House and HMRC as a part of the tax return.

A person holding a calculator while working

Abridged Accounts for Small Companies

We have mentioned the conditions to qualify as a “small” company. If you meet any of the two requirements, you can prepare abridged accounts that contain:

  • A simple profit and loss statement (not required by Companies House)
  • A simple balance sheet
  • A statement confirming the company members have agreed to prepare abridged accounts for the time covered in the accounts
  • Notes
  • A director’s report (not required by Companies House)
  • An auditor’s report (unless exempted)

As a small limited company, you can only prepare abridged accounts if the company members authorise them. You don’t have to send a copy of the profit and loss statement or the director’s report to Companies House. They are required for the members. It’s important to mention on the balance sheet that you haven’t sent the profit and loss accounts to the Companies House.

Accounts for Micro-Entities

Micro-entities are smaller than ‘small companies.’ You will qualify as a micro-entity if you meet any two of these conditions:

  • Your annual turnover doesn’t exceed £632,000
  • Your balance sheet total doesn’t exceed £316,000
  • You have ten or fewer employees

Micro-entities accounts include:

  • A simple profit and loss statement (not required by Companies House)
  • A simple balance sheet
  • Notes
  • A director’s report (not required by Companies House)
  • An auditor’s report (unless exempted)

Accounts for Dormant Companies

Companies that don’t receive any income or aren’t trading are known as dormant. Such companies only have to submit their statutory account to Companies House and not to HMRC. They can prepare simple accounts without profit and loss statements, director’s reports, or auditor’s reports.

Filing Your Statutory Accounts

Now that you know what to include in your statutory accounts, the most crucial part is filing these accounts. You can submit your annual accounts online after the end of your company’s financial year. Each company gets different deadlines to submit their annual accounts to Companies House and HMRC, but it’s better to file them at the same time to avoid confusion and errors.

Tax deadlines

Submitting Statutory Accounts to Companies House

A company must submit its annual accounts to Companies House after its first financial year but before 21 months of its formation. The first financial year starts when a company registers at Companies House and ends at ARD, the last day of the month the company was registered.

Here’s an example to make it simpler for you. Suppose you registered your company at Companies House on 10th March 2022— this date represents the start of the financial year. The accounting reference date will be 30th March 2023— the end of the financial year. So you must submit your annual accounts at Companies House by midnight on 1st December 2023 (21 months after the company formation).

After completing your first year, the annual accounts submission deadline will be nine months after the ARD. For example, your ARD is 31st March, so you should submit the accounts at Companies House by midnight on 1st December the same year (9 months after the ARD).

Submitting Statutory Accounts to HMRC

A company has an accounting period for Corporation Tax which is no longer than 12 months. Once this accounting period ends, you get 12 months to submit your annual accounts to HMRC as a part of your tax return. Typically, the accounting period corresponds with the financial year, but it can be different during your first year. In this case, a company must file two tax returns, one for the first 12 months and the second to cover the extra time between both periods.  

For example, your company was formed on 10th March 2022 and started its operations immediately. It’s first accounting period will end on 9th March 2023. The ARD for annual accounts is 31st March 2023 so the second accounting period will end on 31st March 2023. That’s why you’ll prepare the first statutory accounts for 10th March 2022 – 9th March 2023, the first Company Tax Return for 10th March 2022 – 9th March 2023, and another Company Tax Return for 10th March 2023 – 31st March 2023.

Once this year ends, your statutory accounts and tax returns will only cover the 12-month financial year, starting on 1st April and ending on 31st March (ARD) the following year.

If your company is dormant for a while, or/and you don’t start trading on the date of formation, you may receive different deadlines for sending financial accounts to HMRC. You can read more about relevant regulations and statutory accounts on the government’s website.

Accounting Records That You Must Keep

You must’ve realised by now that preparing and filing annual accounts is a complicated process that requires a lot of data. So it’s best to keep all your financial and accounting records to complete these accounts. Here’s a list of things that you must keep:

  • Complete information on the income your business receives
  • Bank statements
  • Details and calculations of business expenses
  • Goods and services you bought or sold
  • Details of the assets you own and the liabilities you owe
  • Lease agreements
  • Mortgage and loan agreements
  • Any money owed to the business
A chartered accountant in London

Legally, you must keep all financial records for at least six years from the end of the financial year. HMRC may evaluate these records to ensure you’re fulfilling your tax obligations, providing accurate information, and keeping records.

Get in Touch with Leading Tax Advisors in London

Preparing accounts, fulfilling every obligation, and submitting within the deadline, while looking after business operations can be a lot. Why not let us take some of your burdens away?

We are a leading tax and accounting consultation company in London and Walsall. Our tax advisors and chartered accountants offer support, guidance, and relevant services to help companies prepare and submit complete accounts. Contact us now for a free initial consultation.

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