All limited companies registered in the UK are required to prepare financial accounts each year and deliver them to Companies House and HMRC. These accounts, which may also be referred to as ‘annual accounts’ or ‘statutory accounts’, report the financial activity and performance of a company during its previous financial year.
The financial year of a limited company is usually a 12-month period that ends on the ‘accounting reference date’ (ARD), which normally falls the anniversary of company formation. Annual accounts are also used to work out how much Corporation Tax a company has to pay to HMRC on its taxable profits.
Every company, whether trading or dormant (not trading), must prepare accounts and provide copies to their members (shareholders or guarantors) and Companies House. Trading companies must also submit accounts to HMRC with each Company Tax Return.
There are 5 types of annual accounts for UK limited companies:
There are three classifications of company accounts for trading companies: small, medium, and large. Within the small company classification there is a subset called micro-entity, which applies to very small companies.
The size of a company is determined by various thresholds for annual turnover, balance sheet total, and average number of employees, each of which impacts the amount of accounting data required in the accounts.
Dormant companies need only prepare dormant accounts for Companies House. They do not have to submit accounts to HMRC or prepare a Company Tax Return when they are not trading for the entirety of their financial year.
A micro-entity company can prepare and submit accounts according to special provisions in the Companies Act 2006 and Small Companies and Groups (Accounts and Directors’ Report) Regulations 2008 as amended by the Small Companies (Micro-Entities’ Accounts) Regulations 2013. This enables very small companies to disclose less information than small, medium and large companies.
To qualify as a micro-entity company, at least two of the following conditions must be met:
Micro-entity accounts cannot be submitted if a business is (or was at any time during its financial year) one of the following:
A company can qualify as a micro-entity in its first financial year if it fulfils the conditions in that year. In subsequent financial years, the company must fulfil the conditions in that year and the year before.
However, if a company that qualified as a micro-entity in one year no longer meets the criteria in its next financial year, it can continue to claim the exemptions available in the next year. If the company then qualifies as a micro-entity by meeting the criteria in the following year, the exemption will continue uninterrupted.
Micro-entity accounts must include a balance sheet drawn up as at the last day of the financial year. These accounts require much less information to be provided than those prepared by small, medium and large companies. Footnotes to the accounts should also be included, where relevant.
Micro-entities benefit from the same exemptions as small companies so there is no need to file a profit and loss account, an auditor’s report or directors’ report with Companies House.
A company is classed as small if it satisfies at least 2 of the following conditions:
A company qualifies as small in its first accounting period if it fulfils the conditions in that period. In any subsequent periods, the company must fulfil the conditions in that period and the period before.
However, if a company that qualified as small in one period no longer meets the criteria in the next period, it may continue to claim the exemptions available for the next period. If that company then reverts back to being small by meeting the criteria for the following period, the exemption will continue uninterrupted.
A company may not prepare and submit small accounts if it is, or was at any time during its financial year, one of the following:
Companies that would otherwise qualify as small but are members of ineligible groups are still permitted to take advantage of the exemption from including a business review (or strategic report) in the directors’ report prepared for members and from filing the directors’ report at Companies House.
If a company takes advantage of any small company provisions, a statement should be included in a prominent position on the balance sheet that states the accounts have been prepared in accordance with the special provisions applicable to companies subject to the small companies regime.
If audit exemption is taken, an audit exemption statement must be included on the balance sheet. The accounts should be signed by a director and filed with Companies House within 9 months of the accounting reference date.
To qualify as a medium-sized company, at least two of the following conditions must be met:
However, a company will not be considered medium sized if it is, or was at any time during the financial year, one of the following:
Medium-sized accounts must include the following particulars for their members:
Certain information can be omitted from the business review (or strategic report) in the directors’ report (that is, analysis using key performance indicators so far as they relate to non-financial information).
Furthermore, a medium-sized company that is part of an ineligible group can still take advantage of the exemption from disclosing non-financial key performance indicators in the business review (or strategic report).
To be classified as a large limited company, the business must meet at least two of the following conditions:
Large limited companies which are trading must prepare accounts comprising:
Companies that have been dormant since their incorporation (i.e. they have never traded) can prepare and file dormant accounts online via WebFiling. The following information should be included:
If a dormant company has previously traded, dormant accounts cannot be used. Instead, abridged accounts should be filed at Companies House. The required content and ease of completion is comparable, so this is nothing to be concerned about.
A dormant company does not need to prepare annual accounts for HMRC if it has been dormant during its entire financial year. However, if it becomes dormant mid-way through a financial year, it will have to prepare a final Company Tax Return and statutory accounts for HMRC for that period of trading.
You must tell HMRC if your company is dormant. HMRC will then confirm when they next expect to receive information from the company.
As mentioned at the beginning of this post, annual accounts report your company’s activity and performance throughout its most recent financial year. Most financial years are 12 months long, but the first year is often slightly longer.
A company’s financial year begins on the date of incorporation and ends on the ‘accounting reference date’ (ARD). The ARD falls on the last day of the month of incorporation, so the first year is usually longer than 12 months.
You must deliver your first accounts to Companies House within 21 months of the date of incorporation.
Using the above dates as an example, you have until midnight on 1 May 2028 (exactly 21 months from the date of incorporation) to file your first annual accounts. Thereafter, you must deliver your accounts no later than 9 months after your accounting reference date.
If your limited company is ‘active’ for Corporation Tax purposes, you must prepare a Company Tax Return for HMRC each year. This will tell HMRC how much Corporation Tax you owe on your taxable profits. You must include full (‘statutory’) annual accounts with the tax return.
It is important to keep accurate records of all business activity and transactions, otherwise you will be unable able to complete your tax return. You can appoint an accountant to do this for you, or you can take on the responsibility yourself if you think you are capable of doing so. If you choose to do your own tax returns, you must enrol for Corporation Tax online .
The filing deadline for tax returns is 12 months after the end of your Corporation Tax accounting period. This deadline is known as the ‘statutory filing date’. The due date for paying Corporation Tax is 9 months and one day after the end of your accounting period.
The accounting period for Corporation Tax will begin on the date you start trading. It is usually 12 months long, though it may be shorter. It will normally align with the 12-month financial year reported in your annual accounts.
All companies must provide a true and fair view of their financial activities. All accounts must comply with the accounting standards and practices issued by the Financial Reporting Council.
If you are in any doubt about your ability to complete your annual accounts properly, please consult an accountant or professional adviser for assistance.