Before we talk about legislation in the United Kingdom for annual accounting reports, we do want to point out that accounting practices are different dependent on the country that you are located in. This means that the law in England & Wales is different to that of Scotland or Northern Ireland. This section will, mostly, focus on the law in England & Wales.
Deadlines
If you run a Limited Company, then it is likely that you will have two deadlines.
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The first deadline will be at the end of the year. This is to pay any corporation tax that is due. While you do not have to file any accounts at this point, it is probably worth doing so. It means that you do not need to stress too much on the actual accounting filing date. You will, however, need to submit your accounts to HMRC at this point. They will calculate how much tax you owe.
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The deadline to file your actual accounts with Companies House will be based upon when you started your company. It will almost always be on the last day of the month you started your company. For example; if you started your business in February, then your deadline will likely be the last day in February. However, do bear in mind that this can be changed.
You are responsible for your own accounts
We cannot stress this enough.
Even if you use a qualified accountant, it is still you that needs to sign off on the accounts at the end of the day. If you fail to submit the accounts on time, or there is an error in the accounts, then it will be you that HMRC will need to talk to in order to ‘fix’ the problem. Of course, a qualified accountant will likely be insured for problems like this, and they are unlikely to make mistakes in the first place.
Account Inspection
This is rare. However, on occasion, HMRC may ask to inspect your accounts. You will likely need to provide accounts from the last few years to them, so even once your accounts have been filed, you will want to keep all of your receipts etc. It will make the inspection process a lot easier. It is likely that HMRC will ask to inspect your accounts if they believe that there are inconsistencies in them. For example; if there have been several years where your business has not been making a profit, or if your company is not making as much money as one would expect a business in that niche to be making.
On occasion, there may be nothing wrong with your accounts. HMRC will inspect several companies ‘randomly’ each year. This will likely happen to you eventually.
It is worth noting that HMRC will expect errors to be made in your accounts. They can never be perfect. However, if you have been clearly hiding something in the accounts, then you may suffer financial penalties, and in rare cases, a prison sentence.
Corporation Tax Rate
If you have to pay corporation tax, then you will be paying 20% tax on any profits you have made. If you do not make a profit, then you will not be paying any tax. However, you will still need to submit your tax return, otherwise you will be ‘enjoying’ significant financial penalties. If you made losses the previous year, then you will be able to carry those losses over to the new financial year. This may help to reduce your tax obligations a little.
What happens if you can’t file your accounts on time?
If you cannot file your accounts on time, you will need to tell either Companies House or HMRC, dependent on who you are meant to hand the accounts to. It is worth noting that there are only a few situations where you will be able to get away with not filing your accounts on time. This includes issues with your computer, or sickness or serious injury. If you cannot file multiple years in a row, even for a valid reason, there is a strong chance that you will be told you need to file your accounts anyway.
If you fail to inform somebody that you are filing your accounts late, then you will have major financial penalties. These penalties will be harsher dependent on how long it took you to file your accounts. They can often stretch to several hundred pounds!