Although there are numerous benefits to registering a private limited company, one of the drawbacks is preparing and submitting Company Accounts every year. 

Many small businesses and micro-entities feel this is a necessary burden and that the pros of registering a limited company far outweigh the cons. But it does not change the fact that these accounts require time to prepare.

Some online accounting software can go a long way to getting all the data you need to file your company accounts. You are ultimately responsible for ensuring all the information provided is accurate and complete. You need to keep your bookkeeping and small business accounting up to date so you can file your company accounts promptly and avoid penalties from HMRC.

What are limited company accounts?

When you register a limited company in the UK, you are required by law to file “Company Accounts” once a year. The full name of this filing is “Company Statutory Accounts” because their filing is required by law. Another common term for this is “Annual Accounts.”

The simple definition of Company Accounts is that it is a filing that shows HMRC your financial status for the last year, your earnings, and your tax-deductible expenditures. Your corporate tax return is a separate filing, although many companies submit it at the same time.

Corporation Tax is different from what you pay as an individual. Registered limited companies are separate legal entities from their directors, employees, shareholders, or other people connected with the business. That’s what makes them so appealing because it minimises the potential risk to directors’ personal finances if the limited company ever goes bankrupt.

Currently, the UK’s corporation tax stands at 19% for companies with profits lower than £50,000 for the year. Companies with profits between £50,000 and £250,000 pay corporate tax on a rising scale, depending on how much they have earned, up to a maximum of 25% corporate tax for companies who score a profit of over £250,000 for the year.

Part of the frustration of Company Accounts is that they must be filed twice, once with HMRC and once with Companies House. You must send the complete accounts with all details to HMRC for tax purposes, but you only must send an abbreviated version to Companies House.

Small businesses and micro-entities can submit to both HMRC and Companies House directly via the Companies House website.

Company Accounts consist of:

• Director’s Report (if      applicable)
• P&L Statement (if      applicable)
• Balance Sheet Statement
• Cash flow statement

Sometimes, additional notes and documents are added to the above, but the above forms the core of the annual company accounts.

The Directors’ Report 

A directors’ report is a statement of the financial status of a company, prepared by the directors of the company.

A small company or micro-entity exempt from providing an audit report does not have to submit a directors’ report as part of the annual company accounts.

The P&L Statement

A Profit and Loss Statement (or P&L Statement, or Income Statement) is a financial report that lays out a company’s earnings and expenditures over a period such as one month, a quarter, or a year. (For the annual company accounts, a period of twelve months is used.) This financial report is not mandatory for small businesses and micro-entities when submitting Company Accounts like the Director’s Report.

The Balance Sheet

The balance sheet is the first mandatory financial report for all companies submitting their Company Accounts, regardless of their size.

A balance sheet shows a company’s financial standing at a specific point in time. Many of the popular accounting software tools provide balance sheets at the click of a button.

Cash Flow Statement

The Cash Flow Statement shows the company’s precise cash situation over twelve months.  

For companies operating on the Cash Method of accounting, the cash flow statement and P&L statement would be identical because the date of “income received” would be the date the cash entered the account and not the date of the invoice. But Limited Companies are forbidden from using the Cash Method of accounting in the UK, and must use the Accrual Method, so the P&L and Cash Statement would look different.

Who can submit and prepare limited company accounts?

The main work that accountants in the UK carry out for limited companies is preparing clients’ Company Accounts.

Limited Company Accounts must be prepared to exact accounting standards to be accepted by HMRC. All the accounting rules need to be followed, and extensive knowledge of tax and accounting is necessary to understand all of what is being filed.

When do limited company accounts need to be filed?

Company Accounts must be filed precisely nine months after the company’s fiscal year-end. In your first year of business, however, your first set of Company Accounts is only due 21 months after the date of incorporation.

If you’ve lost track of your filing dates, Companies House will be able to provide these for you. Just type in your company number into the Companies House website, and they will be able to give you the details on when your filing is expected.

What happens if you don’t file Company Accounts with Companies House at the appropriate time?

If you miss your filing date for your limited company accounts, you will instantly be fined £100 by Companies House. This number escalates rapidly to as high as £1,500, so it is imperative that you stay on top of your Company Accounts filing date or that you have an accountant that competently takes care of this for you.

If you miss filing for a second year, then the penalty doubles. Repeated violations can also lead to time in court defending yourself. 

Even though the Company Accounts are filed nine months after the company’s fiscal year-end, your Corporation Tax Return does not need to be filed until twelve months after the end of your company’s fiscal year. But your company’s tax bill needs to be paid nine months and one day after the end of your company’s fiscal year.

Just like Company Accounts, there is no free software that can be used to prepare your Corporation Tax Return. Accountants use special accounting software (which they must pay a fee for) to prepare the return.

Like Company Accounts, if you fail to submit the Corporate Tax Return on or before twelve months after the end of your company’s fiscal year, you will receive an immediate £100 penalty, and it escalates rapidly from there.

Who can sign limited company accounts?

By law, Company Accounts can be submitted without any Accountant’s Report or signature. You are also allowed to send it to a non-qualified accountant to look over the accounts before signing them and sending them over.

Internally within a company, however, there might be bylaws regulating who inside the company can sign the accounts.

Falsely submitted accounts can result in a lot of hassle and sometimes penalties. Hence, within the company’s interests to submit to have bylaws regulating how these are submitted when the time comes up.

Company Accounts do not need to be submitted by an accountant. But you must be aware that, as director, you are held entirely responsible for the content of the accounts. 

How to submit limited company accounts

If your company accounts are exempt from an audit— small businesses and micro-entities—you can submit both the HMRC and Companies House version of your Company Accounts directly on the Companies House website.

After logging in with your credentials, find the company for which you want to submit accounts and click “File Accounts”.

The Companies House website then guides you through the following steps quite easily. Provided you have prepared your reports accurately, there should be no difficulties in this procedure.

It is also possible to submit Company Accounts on paper. These must be sent in far ahead of time, and no additional time will be given if the accounts are rejected. We strongly recommend using the digital submission process.

Can limited company accounts be prepared on a cash basis?

Cash basis accounting is based on the date that cash enters or leaves a business. The accrual method of accounting is based on the invoice date of the income or expense.

By law, UK limited companies are forbidden from using the cash basis of accounting. Only freelancers/sole traders/self-employed individuals are allowed to use the cash basis of accounting. And, even then, only when their turnover is £150,000 or less for the year.

Because Limited Companies are bound to use the accrual method of accounting in their day-to-day affairs, their Company Accounts must all be prepared using this accounting method.

So, no cash method company accounts are allowed for UK limited companies.

Do limited company accounts have to be audited?

If you are a small business or a micro-entity, your annual accounts do not need to be accompanied by an auditor’s report. You are still welcome to provide an auditor’s report even if your company is exempt.

A company is not obliged to have an audit if it meets two of the following requirements.

How long do you keep limited company accounts?

UK limited companies need to keep their records for six years. There are some exceptions to this, such as if the records show purchases of items (capital assets) that are expected to depreciate over a period of more than six years.

If your company filed its accounts late and HMRC is conducting a check on the matter, then that company is forbidden from destroying the records until the HMRC completes its enquiry.

Are private limited company accounts public?

Company Accounts are required to be submitted to HMRC and Companies House. The version submitted to Companies House is usually a shortened version of the one submitted to HMRC.

The Companies Account version is public, but the HMRC version is private. There is very little information about your finances that can be gleaned from the shortened version, so it is important to have this version prepared by someone who knows what they’re doing. Failing to do so, your company’s earnings and other minute financial details would be publicly available.

Preparing full and shortened versions of company accounts is one of the services that an accountant usually offers.

The main benefit of hiring an accountant—tons of time saved that you would lose having to research all the nuances and minor details involved in preparing accurate company accounts and peace of mind that your accounts are correct.