When you run a business, you must file company accounts – it is a legal requirement regardless of whether you make a profit, loss, or you are not trading or dormant.
This article covers the information you need to include in your accounts and explains how and when to file them. It also covers the procedures for filing accounts if your company is dormant.
Although you must meet legal requirements by filing at the right time, company accounts are also an important way to ensure you and your shareholders understand how your company is performing by presenting key figures in a single place.
Profit and loss account
Notes to the accounts
The directors’ report is a narrative section rather than a set of figures. It gives you the opportunity to remind shareholders of the main activities of your business and update them on the company’s performance over the past year and its prospects for the future. It should also include details of any dividends due to shareholders.
In this section, you should list the names and responsibilities of directors who held office during the reporting year. Individual directors may also wish to include reports on their own areas of responsibility.
The report should be approved by the board and signed by a director with the appropriate authority.
A balance sheet is a comprehensive set of figures that puts a value on everything your business owns. It also sets out any payments it has to make as well as any money owed by debtors that are due by the last day of the financial year covered by the accounts.
The balance sheet includes two sets of figures for year-on-year comparison – one set for the reporting year and one for the previous year. Where an item on the balance sheet requires explanation, it should have a reference number relating to information on the Notes page.
The main items to include in the balance sheet are:
Tangible assets, including cash, inventory, vehicles, equipment, buildings, and investments
Value of stock at year-end
The amount owed by debtors on the final day of the accounting period
Cash in bank accounts and in hand
The amount owed by creditors that will fall due within one year
The value of net current assets or liabilities
The total of assets less current liabilities
Any provision for liabilities
Value of net assets
Value of capital, reserves, and called-up share capital
Value of shareholders’ funds
The balance sheet should be signed by a director with the appropriate authority and approved by the board.
The profit and loss account sets out the calculation of your profit or loss for the reporting year. The figures in the profit and loss account include:
Cost of sales
Corporation Tax due
Profit for the reporting year
Check out a Profit And Loss Forecast Template.
Notes to the accounts is a section of the annual accounts that provides additional detail and context to certain figures in the balance sheet or profit and loss account.
In addition to information on the accounts, the notes must also include a statement on:
The accounting principles used.
The basis of preparation.
The way turnover and depreciation are represented in the accounts.
You will need to file your accounts with Companies House and also with HMRC when you submit your tax return.
Companies House – you can file online by registering for the WebFiling service. You must provide an email address and choose a secure password. You will then receive an authentication code to use when you submit your accounts. Alternatively, you can post a set of accounts to Companies House.
HMRC – you can also file online by registering with HMRC. You will receive a user ID and password to use for submissions.
There is no set date for filing company accounts. The due date is determined by the date you registered your business with Companies House.
If your business is new, you must file your first accounts 21 months after registration with Companies House.
Established businesses need to file nine months after your company’s financial year ends.
The dates for filing accounts with HMRC are different. You must file your accounts when you submit your Corporation Tax return 12 months after the end of your accounting period.
You will have to pay penalties if you do not file your accounts with Companies House by the deadline. You’ll automatically receive a penalty notice if you miss the deadline for filing your accounts.
Time post-deadline Penalty
Up to 1 month £150
1 to 3 months £375
3 to 6 months £750
More than 6 months £1,500
The penalty is doubled if your accounts are filed late two years in a row.
You don’t have to file a full set of accounts to Companies House if you are a small business that meets any two of the following criteria:
Turnover less than £10.2 million
Balance sheet less than £5.1 million
Less than 50 employees
Instead, you can file an abridged version, which does not require a directors’ report or a profit and loss account. However, you must provide a full version to shareholders and to HMRC with your company tax return.
You can find out more about abridged accounts here.
Even if your company is dormant - if it’s not doing business and doesn’t have any other income – you must still file accounts with Companies House.
Companies House defines a company as dormant if it has had no ‘significant accounting transactions’ during the accounting period. Significant transactions don’t include:
Filing fees paid to Companies House
Penalties for late filing
Money paid for shares during the incorporation
Dormant accounts can be submitted by the Companies House WebFiling system. Filing dormant accounts is free; however, there are penalties if the accounts are not filed by the deadline.
You don’t have to inform Companies House if your dormant company restarts trading. Next time you submit accounts, this will indicate that your company is no longer dormant.
If you decide the dormant company will no longer trade, you can choose to close the company using the Companies House online service to apply to strike off and dissolve a company.
It is the responsibility of company directors to file accounts on time. Failure to comply can lead to a fine. If there is a serious breach, the company may be struck off the Companies House register.
Although directors can choose to have a professional adviser prepare and file accounts on their behalf, they remain responsible and accountable for ensuring that the accounts are filed on time.
Preparing company accounts can be complicated and time-consuming, and you can face fines if you make a mistake. Our team of small business accountants are highly-experienced in helping firms with the preparation and filing of company or statutory accounts.