Year End Checklist for Limited Companies
There are many benefits to choosing to run your business as a limited company rather than a sole trader. It can be more tax efficient and is also a separate legal entity from the owners so, in most cases, you are not personally liable should the business face financial or legal challenges. However, the administrative burden is greater and there are some key legal reporting requirements that Limited Companies directors should be aware of.
What is the Year End?
A company Year End is the date that their accounting period ends and a trigger to start preparing documents ready to send to HMRC and Companies House.
There are detailed guidelines on the government website here, a good accountant can also help to walk you through the key requirements for your business.
Annual Accounts Preparation
Your accounts need to prepared in accordance with UK GAAP and depending on the size of your business in reference to with FRS 105 or FRS 102.
Annual Accounts include an Income Statement showing your profit (or loss) for the period as well as a Statement of Financial Position (also known as a Balance Sheet) showing your position as at the end of your accounting period. This includes the value of your assets, liabilities, capital and reserves. Footnotes will include information about transactions between your company and its directors, such as loans.
What to file with HMRC
- Annual Accounts
- Company Tax Return (CT600) showing your profit and calculating the Corporation Tax due on it.
What to file with Companies House
Assuming that you use FRS 105, the financial reporting standard for micro-entities, then you need to submit two documents The Statement of Financial Position and the Footnotes. These will be published and available to the public to view. As you grow, you may need to consider using FRS 102 if you pass certain thresholds relating to turnover and the number of employees. I can provide advice on preparing accounts for larger companies, as required.
Preparing for the Year End
You need to get your accounts in order before you can create your financial statements, file your accounts and calculate your Corporation Tax.
Ensuring that you account for all of your expenses will help to reduce your taxable profits and Corporation Tax liability.
HMRC’s rule is that expenses must be “wholly and exclusively” for business use, so if you bought something specifically for your business – you can probably claim it as an expense.
There are specific rules that apply for company directors for items such as working from home and vehicles. I can provide more information on this for clients or HMRC has full details on their website.
Ensure company records are complete for the year including the following:
- A copy of your year end bank statement
- List of amounts owed to and by the company
- Stock value, cash and assets held.
Using accounting software such as Xero can help make this process as much of the work has been done throughout the year in reconciling the bank feed and uploading supporting invoices and other paperwork.
The deadlines can be a bit confusing as you need to file your tax return 12 months after the accounting period end. However, your Corporation Tax bill needs to be paid nine months and one day after this date. Equally, you need to file your annual accounts with Companies House within nine months of your year end.
If you miss the deadlines the HMRC penalties are £100 on the first day and another £100 after 3 months. After 6 months the penalties get bigger, at 10% of unpaid tax, which repeats after 12 months.
Companies House deadlines start from £150 if your filing is up to a month late rising to £1,500 over 6 months.
As well as your Annual Accounts and Corporation Tax, there are other things that must be filed regularly for your company.
- VAT returns
- Annual confirmation Statement with Companies House
- Income Tax Self Assessment for company directors.
- Payroll reporting
These requirements may be monthly, quarterly or annually. Other tasks that you may like to put in your calendar for your company could include a review of your processes, products and suppliers to make sure that you are as efficient and as effective as possible as you start each new financial year.
If you'd like to book a free consultation to discuss any of the above, get in touch.