What is your company yearend and what do you need to know?
New Limited Company directors must complete their yearend, but what is it and why do you need to do one? In this blog we explore what yearends actually are, what you need to be aware of, and the support that’s available for you.
What is a yearend?
It’s the official date your company’s accounting period ends. You must also return certain documents back to HMRC and Companies House by this date. If you’re new to contracting and running a Limited Company we’d advise discussing your yearend with your accountant, to ensure you don’t miss any important information, and get it right first time.
Company accounts and tax returns – the deadlines
At the end of your company’s financial year (also known as your yearend or accounting period), you must prepare and file the following:
- Your company’s tax return
- A full ‘statutory’ annual accounts
Every Limited Company’s tax return and accounts must meet the following deadlines set out by HMRC and Companies House:
Companies House requirements
- Filing your company’s first accounts with Companies House – 21 months from your company’s registration date with Companies House
- File annual accounts and subsequent years annual accounts with Companies House – 9 months after your company’s financial year ends
HMRC’s requirements
- Pay the Corporation Tax due, or inform HMRC that your company doesn’t owe any – 9 months and 1 day after your ‘accounting period’ for Corporation Tax ends
- File a Company Tax Return – 12 months after your accounting period for Corporation Tax ends
Your accounting period for Corporation Tax is the period of time covered by your Company Tax Return. This is usually the same 12 months as the company financial year, that’s covered by your annual accounts.
What you need to file with HMRC
Your Company’s Tax Return
Details of your company’s income, less tax allowances and expenses, must be included on your CT600 or Company Tax Return. The remaining amount (your profit) is then used to calculate how much Corporation Tax your company must pay.
Annual Accounts or Statutory Accounts
The Annual Accounts you must submit to HMRC must include the following:
Income Statement – Displays the profit or loss of your company made for that accounting period
Statement of Financial Position – Provides a picture of your company’s accounting period end date, displaying the cumulative value of your business based on its assets, liabilities, reserves and capital.
Footnotes – to display transactions between your company and its director/s, such as loans, guarantees and advances.
What you need to file with Companies House
If you use the FRS 105 to prepare your annual accounts (using the financial reporting standard for micro-entities) – You’ll need to submit two documents from your Annual Accounts to Companies House:
- The Statement of Financial Position
- The footnotes
Once these documents have been submitted, they will publish them on their website, and anyone is able to view them.
What do you need to prepare for your company’s yearend?
You must do the following before being able to prepare your Annual Accounts and Company’s Tax Return:
- Manage your expense – every £ you’re legitimately able to claim as a business expense is another £ off your company’s profits, and will therefore mean less profit = less Corporation Tax to pay.
- Chase late invoices – would you rather your money in your pocket, or your clients? Chase all outstanding invoices before your company’s yearend, and once all money is in your business bank account you’re able to reconcile your accounts, to ensure they’re 100% correct.
- Get all your paperwork together. Your accounts will need evidence to back them up, which is traditionally in the form of receipts and income records. You’ll need to keep these records for a minimum of 6 years from the end of your company’s accounting period.
- What are the deadlines? Your tax return’s deadline is 12 months after the end of the accounting period which it covers. Should you miss the deadline you’ll be liable to pay a penalty. There’s also a separate deadline for your Corporation Tax bill, which is 9 months and one day after the end of your company’s accounting period.
You’re required by Companies House to provide to them your company’s annual accounts within 9 months from the date of your yearend, and within 21 months of your company’s registration date (but only if this is your very first return).
What happens should you miss the deadlines?
You’ll be fined, and the longer you leave a deadline, the greater the fine will be. Miss more than one deadline, and you can expect the following:
HMRC – late filing penalties
Late by a day: £100 fine
Late by 3 months – another £100 fine
Late by 6 months – HMRC will estimate your Corporation Tax bill, and add on a penalty of 10% of the unpaid tax
Late by 12 months – another 10% will be added to your unpaid tax bill
Late more than 3 times in a row – your fines increase to £500 each
Companies House – late filing penalties
Late by a month – £150
Late from 1 to 3 months – £375
Late from 3 – 6 months – £750
Late over 6 months – £1,500
File late twice in two consecutive years and your penalties will double
If you fail to provide your accounts and / or Confirmation Statement when it’s due, you’ll be fined and you company could be struck off the Companies House register.
What else will you need to be aware of?
VAT Returns – most Limited Companies file quarterly VAT returns to HMRC, and also pay quarterly. There are different schemes such as ‘yearly’, but the majority are quarterly for VAT. VAT quarters depend on the quarters given by HMRC (these are either Jan/Apr/Jul/Oct, Feb/May/Aug/Nov or Mar/June/Sept/Dec). VAT must be paid 1 month and 7 days after the end of your VAT quarter, and therefore is submitted and paid to HMRC (if a liability is due) four times every year.
Confirmation Statement – As a Limited Company director you’re required to confirm you company’s information once a year with Companies House. Fail to do so and you’ll be subject to fines personally in criminal courts, and companies can and have been struck off the register. Your Confirmation Statement needs to be filed once every year, and within 14 days of its due date (which usually is a year after your company’s incorporation date, or the date of your last Confirmation Statement). You’re still required to do this, even if your company is dormant.
Financial planning – Who doesn’t want more money in their pocket? Effective financial and tax planning can help you do so, by reducing your overall tax bill, and help plan for your financial future. Maybe you have a pension or an active ISA, and if you have a spouse their allowance can also play an active part in saving money, and making a huge difference to your savings.
Aardvark are here for you – no matter what stage you’re at
Tax is hard to get your head around, especially when you’re busy running your Limited Company. Why not leave it up to the experts, who are able to keep you on the straight and narrow with your obligations, to ensure you never miss a date. With dedicated personal accountants on hand to offer tailored advice and support for your personal and professional needs, get in touch today to find out how we can help you.
Note: All the information and advice in this blog post was correct at the time of writing.