Every company has a duty to prepare a set of accounts which report on the company’s performance and activities during the financial year. A copy of these accounts must be sent 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. All private and public companies, whether trading or not, must also send their accounts to Companies House, as well as an annual return.
When a company’s accounts need to be filed will depend on a company’s accounting reference date. This is a company’s financial year-end - a 12-month period for which you must prepare annual financial statements.
For new companies, the first accounting reference date is the first anniversary of the last day in the month in which the company was incorporated. You can change the current or your last accounting reference date by extending or shortening the period, although you need to notify Companies House if you do this. There are also restrictions: you can’t extend a period so it lasts more than 18 months from the start date of the accounting period unless the company is in administration and you can’t extend more than once in five years unless: it’s approved by the Secretary of State; the company is in administration; or the company is matching up its accounting reference date with that of a subsidiary/ parent undertaking in the UK or European Economic Area (EEA).
Private companies usually have nine months and public companies six months to submit their accounts to Companies House after the end of each accounting reference period. If your company's first accounts cover a period of 12 months or less, the normal times allowed for delivery apply. If those accounts cover more than 12 months though, you must deliver them:
All companies – whether trading or not – must keep accounting records which display a company’s transactions and show its financial position at any time. These must be open to inspection by the company’s officers and kept at its registered office address (or place thought suitable by directors) for three years by private companies, or six years by public companies.
They must show all of a company’s incomings and outgoings; and all its assets and liabilities. If the business deals in goods the records must contain statements of stock held by the company at the end of each financial year; stock takings from which you have taken or prepared any statements of stock; and all goods bought and sold (other than by ordinary retail trade) This must include the goods, the buyers and sellers.
The accounts are prepared for a company for each of its financial years by its directors. These are known as individual accounts. The company's board of directors must approve the accounts and have them signed on their behalf before they send them to Companies House. Although there are some exemptions, they must generally include:
Public companies must lay its accounts before its members at an Annual General Meeting (AGM), but private companies are no longer legally obliged to do so.
If you are late filing your accounts with Companies House you will face an automatic financial penalty. If you fail to file them at all this is a criminal offence, with all the directors risking prosecution which carries a fine of up to £5,000 for each offence.
Each company is classified as small, medium or large, depending on their thresholds for turnover, balance sheet total and the average number of employees. All companies which do not fit the criteria for small or medium sized companies are classed as large companies and must prepare and file full accounts.
The accounts prepared and submitted by a small company need not disclose as much information as medium-sized and large companies. Public companies and certain financial services companies cannot qualify as small companies. To qualify as a small company it must meet at least two of the following conditions:
To qualify as small, a group of companies must meet at least two of the following conditions:
Generally, small company accounts prepared for shareholders include:
A company can deliver a copy of the accounts it prepared for its members under the small companies regime to Companies House, or it can deliver an abbreviated version. An abbreviated version would not include a copy of the directors’ report or the profit and loss account and the balance sheet can be abbreviated. If you do choose to abbreviate the accounts – unless you are exempt from audit (see below) - you will also need a special auditor's report which must state the company is entitled to deliver abbreviated accounts and have been properly prepared.
To qualify for audit exemption, a company must qualify as small (see above); have a turnover of not more than £6.5m; and have a balance sheet total of not more than £3.26m. However, even if a company meets this criterion its accounts must be audited if demanded by a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares.
Most parent companies or subsidiary undertakings must submit audited accounts to Companies House - even if they would otherwise be eligible for audit exemption – as do public companies (unless the company is dormant) and certain financial services companies (including an authorised insurance company, a banking company, or an e-money issuer).
If a company qualifies for audit exemption it may submit unaudited accounts to Companies House in the form of an abbreviated balance sheet and notes or, if it chooses, full accounts. Small companies that deliver a full balance sheet may choose not to include a copy of the directors’ report and/or a copy of the profit and loss.
A medium-sized company can also choose to submit reduced information to Companies House. Public companies and certain financial services companies cannot qualify as medium-sized companies. To be a medium-sized company, it must meet at least two of the following conditions:
Disclosure of compliance with accounting standards and related party transactions may be left out of the accounts medium-sized companies send to their members. The accounts must include:
Abbreviated accounts can be sent to Companies House but these must still include:
Each year every company, whether trading or dormant, must send an annual return to Companies House which contains key information about the company including details of directors, secretary, shareholders, etc. You must complete the annual return by the 'made-up date', which is a date not later than 12 months after the date of the made-up date of the previous annual return; or in the case of a company's first annual return, the anniversary of the date of incorporation.
Other notices that you may have to file with Companies House include:
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