Every company must submit its first set of annual accounts to Companies House within 21 months of incorporation.
Thereafter, it must submit accounts within nine months of every year-end. A Corporation Tax return is produced for each set of annual accounts and this is usually done at the same time.
What’s the difference between full accounts and filleted accounts?
A company must produce full accounts for its shareholders. Full accounts comprise a balance sheet, income statement, explanatory notes and sometimes a directors’ report. The shareholders, who have invested in the company, get to know how the company has performed.
Smaller companies can submit a simpler, less informative format of accounts to Companies House. These are known as “filleted accounts” and only comprise a balance sheet and fewer explanatory notes.
Most companies that are eligible to only submit the filleted accounts to Companies House and keep their income statement for private viewing only.
What are Micro-entity accounts?
Micro-entities are very small companies. Your company will be a micro-entity if it has any 2 of the following:
- a turnover of £632,000 or less
- £316,000 or less on its balance sheet
- 10 employees or less
- prepare simpler accounts that meet statutory minimum requirements
- send only their balance sheet with less information to Companies House
- benefit from the same exemptions (filleted accounts) available to small companies
Since they were introduced, many companies have taken advantage of the micro-entity rules and produced simplified accounts.
Should my company make use of simplified accounts?
If your company has a small number of shareholder-directors who are actively involved in the day-to-day running of the business, then why not?
There’s nothing that the annual accounts will tell the shareholder-directors that they shouldn’t already know from the ongoing bookkeeping and regular management accounts.
However, a company can use its annual accounts to tell a story to the outside world. Filing more comprehensive accounts at Companies House may be informative for:
- existing and potential customers
- credit reference agencies
- banks and other lenders
- actual and potential investors
- competitors (so beware)
It’s useful to have the choice of what your company discloses at Companies House and there are always ways of giving financial information privately to some of these organisations.
If you do, remind them that the information you are providing is not publicly available and should be kept confidential!
Where do the numbers come from?
Our view is that all businesses should keep their bookkeeping up to date at all times so they know the financial performance at the click of a mouse.
Cloud accounting makes this very easy to achieve.
Once you have moved into the new financial year your balance sheet and income statement from your accounting software can be converted into accounts for Companies House and a Corporation Tax return for HMRC.
It’s useful to wait two or three months to see if something happens after your year-end that affects last year’s numbers. For example:
- if a debtor goes bust without paying you then the debt owed at the year-end is written off in last year’s accounts.
- if you have to sell some of your stock at a knock-down price to clear it out then the value of your year-end stock should be the lower of what you paid for it or what you sold it for
But once you think nothing will change about last year’s numbers then the annual accounts and Corporation Tax return can be finalised and put behind you.
There’s no need to file the accounts as soon as they are finalised so long as they are submitted within the nine-month deadline.
Make sure your annual accounts agree to your bookkeeping
Accountants can be awful at this!
Annual accounts are prepared from the numbers in your bookkeeping software. Often there will be adjustments that your accountant makes as part of the process. Bad debts and stock write-downs mentioned above are good examples and so is the final calculation of corporation tax.
These adjustments are made by the accountant in their software but they must also be made in your bookkeeping software. Otherwise your books are different from the company’s accounts and the financial information you use to run your business will start from the wrong place!
It’s astonishing how often a company’s annual accounts and bookkeeping records do not agree!
How can an Accountant help you with your annual accounts?
We’ll help you to have up to date, accurate bookkeeping so you always know how your business is performing.
If you’re eligible to prepare micro-entity accounts we’ll discuss with you whether it’s worth doing so and we’ll also agree whether you submit full accounts or filleted accounts to Companies House.
Then, once we’re two or three months into the new financial year we can produce and finalise your annual accounts and Corporation Tax return with no surprises.
The benefits of hiring an accountant are many, but let’s look at the top four:
- You’ve enough to do running your business and hiring an account gives you time back to concentrate on what you’re good at.
- Accountants are trained over many years to manage the more in-depth accountancy tasks – not to mention tax! Most business owners don’t have a finance/accounting background and a good accountant can take care of your accounting obligations. Removing the worry out of a complex area.
- You may be anxious about how much an accountant will cost you, but like most services these days, you can choose how much you involve an accountant in your business. An interesting question to ask is how much will it cost you not to engage an accountant?At Blue Dot Consulting, we love finding you ways to save you money and help you sew up any holes – improving your profitability and cashflow.
- Choosing the right accountant can be an invaluable resource for business improvement – providing an impartial eye on your financial health.
Our professional bookkeeping services make sure your annual accounts are prepared efficiently. Working with businesses around Fulham, Putney, Richmond and Kingston, we’ve been preparing annual accounts since 2001.
If you feel your business would benefit from clear and jargon free accountancy services, get in touch for a chat or let’s arrange a meeting.