Contents of accounts.
Generally, accounts must include a profit and loss account, a balance sheet signed by a director and notes to the accounts. Also accounts must generally be accompanied by a directors’ report and a strategic report (if the company does not qualify as small or micro - see below). An auditors’ report must also be included (unless the company is exempt from audit - see below).
Small companies and Micro companies are generally able to prepare and file simplified accounts and may also benefit from an exemption from certain disclosures.
Every company must send a copy of its annual accounts for each financial year to every member of the company, every holder of the company’s debentures and every person who is entitled to receive notice of general meetings. However, this does not apply to certain dormant subsidiary companies that are exempt from preparing accounts. There is no longer a statutory requirement for private companies to lay their accounts before members at a general meeting. The company’s board of directors must approve the accounts before they send them to the company’s members.
Accounting dates.
Every company must prepare accounts that report on the performance and activities of the company during the financial year.
A financial year is usually a 12 month period for which you prepare accounts.
For an existing company, your financial year starts on the day after the previous financial year ended and for new companies, their first accounting reference date will be the last day of the month in which the anniversary of their incorporation falls. A company can change the current or the immediately previous accounting date but it must do this before the filing deadline of the accounts for the period that you wish to change. You can change an accounting date by shortening the period as often as you like and by as many months as you like. However, there are restrictions on extending accounting reference periods.
Private companies have 9 months, and public companies have 6 months to submit accounts to Companies House after the end of each accounting reference period.
Accounting records.
Every company must keep detailed accounting records of all financial transactions and private companies must keep these records for 3 years (however it is recommended to keep records for longer than this as they may be required for tax purposes) and public companies must keep them for 6 years.
Filing accounts with Companies House.
All private limited and public companies must file their accounts at Companies House. You must send Companies House a copy of the accounts you have already prepared for your members or shareholders. However small companies and micro-entities can prepare an abridged version of those accounts which has less detail by omitting certain balance sheet items. Qualifying dormant companies can deliver even simpler annual accounts to Companies House.
Deadlines for filing accounts.
Unless you are filing your company’s first accounts, the time normally allowed for delivering accounts to Companies House is: 9 months from the accounting reference date, for a private company and 6 months from the accounting reference date, for a public company.
If you are filing your company’s first accounts and those accounts cover a period of more than 12 months, you must deliver them to Companies House within 21 months of the date of incorporation for private companies or 3 months from the accounting reference date (whichever is longer) within 18 months of the date of incorporation for public companies or 3 months from the accounting reference date (whichever is longer).
Penalties for failing to file accounts.
Failure to deliver accounts on time is a criminal offence. In addition, the law imposes a civil penalty for late filing of accounts on the company. The amount of the penalty depends on how late the accounts arrive and whether the company is private or public at the date of the balance sheet e.g. the penalty for the late filing of a private company's accounts varies from £150 if late by less than 1 month up to £1,500 if more than 6 months late.
Company sizes.
There are 3 classifications of company size to consider when preparing your accounts - small, medium or large. For small companies there’s also sub-classification called a micro-entity, which applies to very small companies.
To determine whether your company is a micro-entity, small or medium-sized, there are thresholds for: turnover, balance sheet total (meaning the total of the fixed and current assets) and the average number of employees.
Any companies that do not meet the criteria for micro-entities, small or medium are large companies.
Large companies must prepare and submit full accounts. Micro-entities can prepare and file a balance sheet with less information than for a small, medium or large company. Additionally, a micro-entity can benefit from the exemptions available to small companies
A micro-entity must meet at least 2 of the following conditions: turnover must be not more than £632,000, the balance sheet total must be not more than £316,000 and the average number of employees must be not more than 10.
Some companies that may qualify as a micro-entity under the above criteria are specifically excluded from filing micro accounts.
A small company can prepare and submit accounts according to special provisions in the Companies Act 2006 and the relevant regulations. This means they can choose to disclose less information than medium and large companies.
For accounting periods beginning on or after 1 January 2016, a small company must meet at least 2 of the following conditions: annual turnover must be not more than £10.2 million, the balance sheet total must be not more than £5.1 million and the average number of employees must be not more than 50.
Some companies that may qualify as small companies are specifically excluded from filing small company accounts.
Audit exemption.
Certain companies do not need to have an audit e.g. a small company or a micro company. However, some companies cannot take advantage of an audit exemption.
Even if a small company meets these criteria, it must still have its accounts audited under certain circumstance e.g. is requested by members.
Declaimer: The above is intended to only be a brief and broad overview of the topic and is in no way intended to be taken as advice. We strongly recommend that you obtain the appropriate independent professional advice before taking any action relating to this topic.
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