What is your company yearend and what do you need to know?

If you’re new to owning a Limited Company you’ll need to complete your yearend, but what exactly is it, and why do you need to complete one? In this blog we explore just that, to ensure you’re a pro when it comes to your yearend.

First things first, what is a yearend?

A company’s yearend is the date which your company’s accounting period officially ends. This is also the date from which HMRC and Companies House expect you to return certain required documents back to them.

If you’re new to the world of Limited Company contracting it’s best to run your first yearend past your accountant, to ensure you get it right first time.

Your company’s accounts and tax returns – what are the deadlines?

After the end of your Limited Company’s financial year (known also as your yearend or accounting period), you’re required to prepare and file:

• a company tax return
• a full “statutory’ annual accounts

Every Limited Company’s accounts and tax return must meet the following deadlines set out by Companies House and HMRC:

Companies House requirements

• Filing your company’s first accounts with Companies House – 21 months after the date you registered your company with Companies House
• File annual accounts and subsequent years annual accounts with Companies House – 9 months after your company’s financial year ends

HMRC’s requirements

• Pay your due Corporation Tax, or inform HMRC that your company doesn’t owe any – 9 months and 1 day after your ‘accounting period’ for Corporation Tax ends
• File a Company Tax Return – 12 months after your accounting period for Corporation Tax ends

Your accounting period for Corporation Tax is the period of time covered by your Company Tax Return. This is usually the same 12 months as the company financial year, that’s covered by your annual accounts.

What you need to file with HMRC

Your Company’s Tax Return

Your CT600 or Company Tax Return must include details of your company’s income, less tax allowances and expenses. Your profit (the remaining amount) is then used to calculate how much Corporation Tax your company is due to pay.

Annual Accounts or Statutory Accounts

The Annual Accounts you must submit to HMRC consist of the following:

Income Statement – Displays the profit or loss your company made for that accounting period.

Statement of Financial Position – Shows a picture of your company’s accounting period end date, displaying the cumulative value of your business based on its assets, liabilities, capital, and reserves.

Footnotes – to show transactions between your company and its directors, such as advances, guarantees and loans.

What you need to file with Companies House

If you use the FRS 105 to prepare your annual accounts (using the financial reporting standard for micro-entities) – You must submit two documents from your Annual Accounts to Companies House. The first is the Statement of Financial Position, and the second is the footnotes. It’s worth noting that once these documents are submitted to Companies House they will publish them on their website, and anyone is able to view them.

What do you need to prepare for your company’s yearend?

Before preparing your Annual Accounts and Company Tax Return, you need to do the following:

1. Manage your expenses – Each pound you’re legitimately able to claim as a business expenses is another pound off of your company’s profits, and therefore less profit means less Corporation Tax to pay.
2. Chase any late invoices – unpaid invoices mean money in your client’s pocket and not yours, so ensure you chase any outstanding invoices before your company’s yearend. Once the money is in your business account you can reconcile your accounts, to make sure they’re 100% correct.
3. Get your paperwork together – accounts need proof to back them up, and this is usually in the form of records and receipts. You’ll need records for everything before you file your company’s yearend, including statements of account from suppliers, bank statements, and income records. All records must be kept for a minimum of six years from the end of your company’s accounting period.
4. What are the deadlines – Your tax return’s deadline is 12 months after the end of the accounting period which it covers, and if you miss the deadline you’ll have to pay a penalty. You’ll also have a separate deadline to pay your Corporation Tax bill, which is 9 months and one day after the end of your company’s accounting period.

Companies House requires your company’s annual accounts within 9 months of your yearend, and within 21 months of your company’s registration date if it’s your very first return.

What happens if you miss the deadlines?

If you miss a deadline, there is an associated fine, and the longer you leave a deadline, the greater a fine will increase. If you miss more than one deadline, you can expect the following fines:

HMRC – late filing penalties

Late by 1 day – £100 fine

Late by 3 months – Another £100

Late by 6 months – HMRC will estimate your Corporation Tax bill and add a penalty of 10% of the unpaid tax

Late by 12 months – Another 10% will be added to your unpaid tax bill

If your tax return is late three times in a row, your fines increase to £500 each.

Companies House – late filing penalties

Late by up to a month – £150

Late from 1 to 3 months – £375

Late from 3 to 6 months – £750

Late over 6 months – £1,500

Late filing two consecutive years – your penalties will double

If you fail to send your accounts and / or Confirmation Statement when it’s due, you will be fined and your company may be struck off the Companies House register.

What else do you need to consider?

VAT Returns – Most Limited Companies file quarterly VAT returns to HMRC and pay quarterly. There are different schemes such as ‘yearly’, but the majority are quarterly for VAT. VAT quarters depend on the quarters given by HMRC (these are either Jan/Apr/Jul/Oct, Feb/May/Aug/Nov or Mar/June/Sept/Dec). VAT is due to be paid 1 month and 7 days after the end of your VAT quarter and therefore it is to be submitted and paid to HMRC (if a liability is due) 4 times each year.

Confirmation statement – every Limited Company director needs to confirm their company’s information once a year with Companies House. If you fail to do so, you will be subject to fines personally in criminal courts, and companies can be struck off the register. Your Confirmation Statement needs to be filed once a year, and within 14 days of its due date (which is usually a year after your company’s incorporation date, or the date of your last Confirmation Statement). You must also do this, even if your company is dormant.

Financial planning – effective financial planning can ultimately mean more money in your pocket, as financial and tax planning can reduce your overall tax bill and help plan for your financial future. Thinking about paying into any ISAs or pensions you may have, and whether you can make the most of your spouse’s allowances also can make a huge difference.

SG Accounting are here for you – every step of the way

Tax is tough, and if you’re new to the game or don’t have a head for numbers, it’s best to leave it up to the experts. Here at SG we love helping contractors, and have a team of expert accountants ready to maximise your take home pay from a tax and accounting point of view. Get in touch today to find out more how we can help you.