Statutory Accounts Preparation and Filing for Limited Companies
There are advantages and disadvantages to running your business as a limited company which you can read about here. We can help you decide on the best format for your business and explain the tax implications. We can also prepare your accounts and file them at Companies House.
Just contact us for a free initial consultation.
We also provide a company formation service.
Limited companies need to produce accounts for a variety of reasons, usually annually.
Companies are required by law to produce accounts – which is why they are sometimes called ‘statutory accounts’.
You must always send copies of the statutory accounts to:
- all shareholders
- people who can go to the company’s general meetings
- Companies House
- HM Revenue and Customs (HMRC) as part of your Company Tax Return
Limited company statutory accounts must be prepared in a certain format and include various notes or ‘disclosures’. The exact requirements depend on the size of the company.
Statutory accounts do a lot more than satisfy a legal requirement. They show you how your business is performing. ‘Reading’ company accounts is not difficult, and accounts contain a wealth of valuable information about your business.
The profit and loss account show the income and expenses and the profit and loss for the year. Prior year figures are included for comparison. Analysis of these figures can show if your growing as expected and if not – why not. Ratio’s of expenses to sales can provide an insight into whether certain costs are higher than expected.
If you are interested in having a closer more up to date picture of business performance, we can prepare monthly or quarterly management accounts which you can read about on our Management Accounts Page.
The company accounts form the basis of the company’s corporation tax return which you can read about on our Corporation Tax Page.
We can prepare your statutory company accounts and corporation tax return for you using your accounting records. We will file the accounts at Companies House (after obtaining your approval) and file the accounts and Corporation tax return with HMRC.
If you are interested in this us preparing your company accounts and corporation tax return, please contact us for a free initial consultation.
Limited company accounts must be prepared in a certain format and contain certain information (disclosures) about the figures in the accounts. If they don’t Companies House may reject the accounts resulting in late filing penalties). If you use an accountant to prepare your accounts you won’t need to worry about this. We’ll pick the best format for your business and make sure the accounts are correct.
If you want to know more read on…
‘Small’ companies can prepare their accounts using a set of standards referred to as FRS102 (Section 1A). A small company is one that meets two of the following three criteria:
- Turnover of £10.2 Million or less
- £5.1 Million or less on its balance sheet
- 50 employees or less
‘Micro’ companies can prepare their accounts using a simplified set of standards referred to as FRS105. A micro company is one that meets two of the following three criteria:
- Turnover of £632,000 or less.
- £316,000 or less on its balance sheet.
- 10 employees or less.
An accountant will also prepare two versions of your accounts. One set will contain the minimum information that needs to be filed at Companies House and will not contain a Profit & Loss account. Accounts filed at Companies House are public and you may not want your competitors to see this information. A detailed set of accounts has to be sent to HMRC with your corporation tax return. You can read about this on our corporation tax page.
The first accounts for a private company need to be filed 21 months after the date the company was registered at Companies House. Subsequent Accounts need to be filed 9 months after the companies’ financial year ends. The rules are different for public companies (PLCs).
Late Filing Penalties
The penalties for private companies are £150 if the accounts are up to 1 month late. There are further, increasing penalties if the accounts are three months and six months late with a penalty of £1,500 if the company accounts are more than six months late.
If you are interested in us preparing your company accounts and corporation tax return, please contact us for a free initial consultation.
The Advantages and Disadvantages of a Limited Company
Limited companies have the following advantages:
- Limited Liability – is the biggest benefit of running your business as a limited company. In case the company goes in to financial difficulty, the assets and personal finances of shareholders are protected to the value of their shareholding. This means that if a company is unable to pay debts, the shareholder will only have to contribute according to the nominal value of their shareholding. Which can be as low as £1.There are some caveats. Banks and other lenders will always require security for loans and overdraft facilities. If the company does not have significant assets to secure the loan the bank will require a personal guarantee from the directors against their personal assets. The directors can also be held personally responsible if they trade irresponsibly knowing the company is in financial difficulty, particularly if they continue to draw money out of the company. HMRC may block the winding up of a company that owes tax until they have investigated whether the directors owe the company money.Limited liability still offers valuable protection. If you want to provide high value services or supplies which can lead to liability claims, then limited liability is important. In such situations, your personal finances and assets are protected. Operating as a sole trader does not have this benefit.
- Tax Efficiency – More opportunity and great flexibility is offered by limited companies in the case of taxation on profits and on personal income. Sole traders are taxed on all of their profits which can result in paying higher rate tax. Companies are taxed on all of their profits, but the directors can keep income level below the higher bands through taking remuneration in combination of dividends and salary. This results in more money being available for reinvestment. There is also a level of profit at which (under the current tax rules) there is less tax to pay overall even if all of the profits of a company are distributed to its directors.
- Professional Image – A professional and corporate image is created by a limited company, thus boosting the value of business. More corporations and industries like to do business with companies, instead of sole traders. This is because limited companies are considered to be more established, credible and committed. Sense of security is also provided by limited liability to certain industry professions while choosing to use the services of new business or while investing.
Limited companies have the following disadvantages:
- Cost – there is a cost associated with forming a limited company although it is not prohibitive. There are also higher ongoing costs due to the increase in compliance and the requirement for more complex accounts.
- More complex accounts – limited company accounts are more complex which results in higher accountancy fees. (However, the difference in fees can be insignificant compared to the potential tax savings and other benefits)
- Increased compliance – Limited companies generally have a greater compliance burden than sole traders. Certain changes to the company have to be notified to Companies House and every company has to file an annual confirmation statement that contains basic information about the company.
- Reduced privacy – Companies House require certain company records and accounts from all limited companies, which become public record and can be accessed by anyone. More detailed information about directors and shareholders can also be viewed, but access to these details can be limited.
If you are interested in setting up a limited company or would like a quote for the preparation of your company accounts and corporation tax return, please contact us for a free initial consultation.