Registered companies in the UK are required to prepare annual accounts for Companies House and HMRC every year. The purpose of these accounts is to report the financial activity of the company and work out how much corporation tax it has to pay to HMRC.
The directors of a company are legally responsible for making sure the annual accounts are completed accurately and submitted by the statutory filing deadline. Copies of the accounts must also be given to shareholders.
Full statutory accounts should include the following:
- A profit and loss account
- A balance sheet
- Notes about the accounts
- A directors’ report
- An auditors’ report (unless the company qualifies for exemption)
- Name and signature of company director
Basically, it’s the company equivalent of income tax but for registered companies. Corporation Tax is based on the profits your business makes, and the rate depends on how much profit is generated. It is normally charged on the taxable profits for a 12-month accounting period that matches your company financial year.
In terms of corporation tax rates, the UK rate is relatively low – significantly lower than personal income tax. This can provide beneficial tax planning opportunities.
HMRC requires your Company Tax Return and full Company Accounts.
Deadline: 12 months after the end of the accounting period. If Corporation Tax is due, this is required to be paid to HMRC within nine months and one day after the accounting period. If your business earns more than £1.5m, you’ll have to pay in instalments.
Companies House only requires an abbreviated set of Annual Accounts (these will be made public on Companies House website).
Deadline: Nine months after your year end (within 21 months of your registration date if it’s your first return).
The following penalties will be charged to the company if you miss the deadlines.
Late filing penalties issued by HMRC
1 day £100
3 months £100
6 months HMRC will estimate your Corporation Tax bill and add a penalty of 10% the unpaid tax
12 months Another 10% of any unpaid tax
If your tax return is late three times in a row, the £100 penalties are increased to £500 each.
Late filing penalties issued by Companies House
Up to a month late £150
1 to 3 months late £375
3 to 6 months late £750
Over 6 months late £1,500
If you file late two years in a row penalties double
Keeping accurate corporation tax records of your income and expenses is essential – and a legal requirement.
Please note, limited companies are legally required to keep accounting records for at least 6 completed years. These records include all receipts, invoices, bank statements, workings and tax-related paperwork.
Companies House may allow a company to extend the accounts deadline if:
- an event you couldn’t control stops you from sending your accounts
- you apply for more time before the filing deadline
While a company remains dormant, no accounts or corporation tax returns need submitting to HMRC. However, statutory obligations for Companies House are still required. These include dormant company accounts and confirmation statements.