Joe Lennon FCCA talks us through the intricacies of year end tax accounts and what your limited company needs to do in preparation.
Dealing with year end accounting for your limited company can be a headache for any business owner. Unfortunately the threat of late fees looming means it’s important to prepare and complete your accounts on time for both HMRC and Companies House. And there's a positive, it’s only once a year!
It was reported that businesses in London and Birmingham have been some of the top offenders for filing accounts late, with over 200,000 UK companies facing hefty fines for missing the Companies House deadline in 2019.
So how do YOU avoid ending up on this list? The answer, early preparation!
What are end of year accounts?
Year end is the end of your company’s accounting period. Also referred to as an accounting reference date, for limited companies this is when you close your accounting for the financial year and file the statutory year end accounts with HMRC and Companies House.
Your year end accounts will typically include:
Profit & loss
How do I prepare for my accounting year end?
Preparing your company's year end documents can be a very hectic time, you’ll be busy chasing unpaid invoices, making sure your books are accurate and getting your expenses in order; all while trying to keep your business running smoothly!
Working with an accountant or business advisor will make the process of filing year end accounts less stressful and the best part is that you will be eliminating the possibility of making costly mistakes, while potentially unearthing ways to save time and money!
At Wellers, we like to send our clients a reminder checklist to keep the year end process on track wherein we ask for documents such as:
Details of any cheque payments
Purchase invoices and receipts
Changes to assets (purchased or sold)
This is not a complete list of documents required, rather just an example of what you may need to supply. It's helpful to provide your accountant with any other information that will assist them with account preparation. You will need to provide documents and details in advance to allow adequate time for the accounts to be prepared and workout any possible savings you may be entitled too.
With the introduction of digital accounting software, this process has become a bit less time consuming with many of the details available at the click of a button.
What needs to be filed with HMRC?
CT600 - Company tax return
Your annual accounts
What needs to be filed with Companies House?
Annual accounts (statement of financial position and footnotes)
When and how to file end of year accounts
Don’t forget that there is a deadline for getting your accounts filed with HMRC and Companies House. These need to be submitted online. If you qualify as a small company according to HMRC's definition, then you can submit abbreviated accounts.
Companies House suggests that many companies align their accounting period with the financial year which ends 31 March. This would make the filing deadline 31 December, or as mentioned below within 9 months of year end.
Pay Corporation Tax (or inform HMRC you do not owe any)
9 months and 1 day after your 'accounting period' for corporation tax ends
File Company Tax Return
Within 12 months after the end of the accounting period
What happens if I miss the year end deadline?
For those who miss the filing deadline there are penalties that will be incurred, and the longer past the deadline the larger the fine.
HMRC late filing penalties
Companies House late filing penalties
Up to a month
Estimated Corporation Tax bill amount and an additional penalty of 10% of the unpaid tax
Additional 10% of any unpaid tax
Over 6 months
The £100 HMRC late penalties are increased to £500 each when your return is late three consecutive times.
If you file late two years consecutively, Companies House penalties double.
You may be able to apply for an extension, but it's important to remember that you must to so before your filing deadline.
Year end accounts can be a frenzied time for limited companies but it's important to get your filing completed on time! Working with a professional will help elevate the stress of deadlines.
Also, keep in mind that this is a good time to re-evaluate other aspects of your business and you may also consider completing your VAT return (if applicable) during this process.
This post was created on 27/02/2020.
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