What is in this article?
Statutory Accounts are referred to as “Financial Accounts”, “Annual Accounts” or “Year-end Accounts”, they all mean the same! Your Statutory Accounts have to be submitted within 9 months after your company’s year-end date to Companies House, or else you will start receiving penalties!
Statutory Accounts consist of a set of financial reports showing how the company performed during the year (Profit and Loss) and the financial position of the company (Balance Sheet). They also note important information that has happened during the year by list disclosures. The Statutory accounts are filed alongside with your tax return to HMRC.
Many construction owners see their accountants once a year and think this is all they should be receiving... this is definitely not right! Your accountant should be involved within your business weekly, advising and updating you on your performance, what to be aware off and any upcoming uncertainties that are approaching you are well prepared.
If you are not receiving this level of service, you should highly consider changing accountants!
1. Profit & Loss (P&L) Account
This shows the performance of the business over the financial year showing a summary of income and expenditure during the year. For many smaller companies, the P&L will not be posted onto Companies House for the public to view so the P&L report serves a great insight for business owners to see how their company is performing. Depending on how your accounts are set, the P&L will show different levels of insight, listing your different types of income you receive will provide better insight, for example, a construction company listing each project they will see the profitability of each one individually instead of just their yearly profitability.
2. Balance Sheet (BS)
This will show the financial position of a business and can help to show the key business ratios that can highlight the key areas of risk and to help plan ahead for example for any cashflow needs.
3. Directors Report
The companies Act 2006 requires larger companies to produce a Director’s report in their Annual accounts to improve corporate transparency. A Director’s Reports includes the business principal activities, any significant events that happened during the year and the impact it has had on the company.
4. Auditors Report
The Auditors Report is only required if the company is carrying out an Audit (compulsory or voluntarily) and is provided by the Company’s Auditors. It will provide whether they believe the accounts give a true reflection of the business.
1. Full Accounts
Full accounts include all the reports such as profit and loss, balance sheet, detailed notes to the accounts, accountants report and a directors report (provides further important information about the company).
2. Abridged Accounts
Companies that meet the small or micro entity criteria, can send a summarised version of the full accounts called the Abridged Accounts. These provide less information about the company and has a simple Balance Sheet and a reduced number of notes to the accounts. A profit and loss is not included and hides a lot of information about the business.
3. Dormant Accounts
A company is dormant if it has had no ‘significant transactions’ during the accounting period or may have been set up but has not traded as of yet.
If your company meets two of the following condition, it is considered to be small:
- You have a turnover totalling less than £10.2 million.
- You have a maximum of £5.1 million or lower on the balance sheet
- You have 50 or fewer employees.
If you are a small company you are able to send abridged accounts to Companies House plus you do not have to send a directors report, profit or loss and have the opportunity to choose if you want an audit or not.
If your company meets two or more of the following conditions, you are defined as a micro-entity:
- Your turnover is lower than £632,000
- Your balance sheet shows a maximum of £316,000 or less
- You have 10 employees or less
If you are a micro-entity then it is not mandatory for you to prepare complex accounts and you can send a simple balance sheet to companies house. A micro-entity receives the same exemptions as a small company.
The deadline for Limited Companies is determined by your Accounting reference date (Year end date). This is taken from when you first form the company, this is automatically set as the first anniversary of the last day of the money in which you incorporated the company. Depending on whether you are filing your accounts or tax returns, there will be different due dates.
- Filing your Annual Accounts with Companies House, your deadline will be 9 months after your company’s financial year.
Corporation Tax Return
- To file your Company Tax Return (CT600), you have 12 months after your accounting period
- However, you only have 9 months and 1 day after the end of your accounting to PAY your corporation tax return.
Accounts - time after the deadline
- Up to a month late - £150
- Over a month but not more than three months late - £375
- More than three months but less than six months – £750
- More than six months - £1500
Corporation Tax Return - time after the deadline
- 1 day late- £100
- When more than 3 months late- Another £100
- 6 months - HMRC will estimate your tax bill and add a penalty of 10% of the unpaid tax
- 12 months - Another 10% of any unpaid tax
If your tax return is late 3 times in a row, the £100 penalties are increased to £500 each.
If your tax return is 6 months late, HMRC will write telling you how much Corporation Tax they think you must pay. This is called a ‘tax determination’. You cannot appeal against it.
You must pay the Corporation Tax due and file your tax return. HMRC will recalculate the interest and penalties you need to pay.
If you have a reasonable excuse, you can appeal against a late filing penalty by writing to your company’s Corporation Tax office.
Frequently asked questions
What Do Company Accounts Involve?
After the end of its financial year, your private limited company must prepare:
1. Full (‘statutory’) annual accounts
2. A Company Tax Return
You need your accounts and tax return to meet deadlines for filing with Companies House and HM Revenue and Customs (HMRC).
You can also use them to work out how much Corporation Tax to pay.
Who Has To Receive Company Accounts?
You must always send copies of the statutory accounts to:
1. All shareholders
2. People who can go to the company’s general meetings
3. Companies House
4. HM Revenue and Customs (HMRC) as part of your Company Tax Return
How Put Together Statutory Accounts?
Statutory accounts must include:
1. A ‘balance sheet’, which shows the value of everything the company owns, owes and is owed on the last day of the financial year
2. A ‘profit and loss account’, which shows the company’s sales, running costs and the profit or loss it has made over the financial year
3. Notes about the accounts
4. A director’s report (unless you’re a ‘micro-entity’)
You might have to include an auditor’s report - this depends on the size of your company.
The balance sheet must have the name of a director printed on it and must be signed by a director.
What Standards Do My Accounts Have to Meet?
Your statutory accounts must meet either:
1. International Financial Reporting Standards
2. New UK Generally Accepted Accounting Practice
What Are Dormant Accounts?
Your company is called ‘dormant’ by Companies House if it’s had no ‘significant’ transactions in the financial year that you’d normally report. Significant transactions do not include:
1. Filing fees paid to Companies House
2. Penalties for late filing of accounts
3. Money paid for shares when the company was incorporated
4. Dormant companies that qualify as ‘small’ do not need to be audited.
What Counts As A Small Company?
Your company will be ‘small’ if it has any 2 of the following:
1. A turnover of £10.2 million or less
2. £5.1 million or less on its balance sheet
3. 50 employees or less
If your company is small, you can:
1. Use the exemption so your company’s accounts do not need to be audited
2. Choose whether or not to send a copy of the director’s report and 3. Profit and loss account to Companies House
4. Send abridged accounts to Companies House
When Can I Use Abridged Accounts?
You can only send abridged accounts if all your company members agree to it.
Abridged accounts must contain a simpler balance sheet, along with any notes. You can also choose to include a simpler profit and loss account and a copy of the director’s report.
The balance sheet must have the name of a director printed on it and must be signed by a director.
Sending abridged accounts means less information about your company will be publicly available from Companies House.
What Is A Mirco-Entity?
Micro-entities are very small companies. Your company will be a micro-entity if it has any 2 of the following:
1. A turnover of £632,000 or less
2. £316,000 or less on its balance sheet
3.10 employees or less
If your company is a micro-entity, you can:
Prepare simpler accounts that meet statutory minimum requirements
Send only your balance sheet with less information to Companies House
Benefit from the same exemptions available to small companies
What Are My Director Responsibilities?
As a director of a limited company, you must:
1. Follow the company’s rules, shown in its articles of association
2. Keep company records and report changes
3. File your accounts and your Company Tax Return
4. Tell other shareholders if you might personally benefit from a transaction the company makes
5. Pay Corporation Tax
This article has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.
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