Year-end accounting for limited companies made simple

Financial year end reporting is a legal requirement for limited companies. If you run a limited company, then at the end of your financial year you must send certain information to HMRC and Companies House.

Financial year-end reporting is a legal requirement, both to ensure that the company pays the right amount of tax, and to provide the public, banks, shareholders and potential investors with accurate information about the company.

Usually your accountant will be responsible for doing this, but it’s important for you as the director to have a solid grasp of what it involves, to make the process as smooth as possible.

This summary will help you get started. Find an accountant for small business who can help you with your year end reporting.

The basics of financial year-end reporting

Every limited company has its own financial year.

This year starts on the company’s ‘birthday’ (i.e. the date you started trading, specified when you registered with Companies House), so the year-end falls on the day before that date in the following calendar year.

It shouldn’t be confused with the tax year, which runs from 6 April to 5 April.

Your financial year is usually the same as your accounting period for corporation tax. This is the period on which you need to report.

What information do I need to report?

Financial year-end reporting involves sending key information about your accounting period to HMRC and Companies House.

You must send your Company Tax Return to HMRC and you must send your Statutory Accounts to Companies House. Sometimes you can make both these submissions together.

If this is your company’s first accounting period it may be a little longer than 12 months. In this case you’ll need to submit an additional tax return to cover the extra time.

Company Tax Return

Your Company Tax Return (form CT600) is the document you send to HMRC.

It contains details of your turnover, expenses, tax allowances and profit, in the form of the company’s Statutory Accounts.

HMRC uses this information to calculate how much you owe in corporation tax (your accountant may have already estimated this amount).

Statutory Accounts

Your Statutory Accounts (also known as your Annual Accounts) are the documents you send to Companies House.

Their purpose is to describe clearly the company's financial activity in that year, mainly for the benefit of HMRC and the company's shareholders.

Statutory accounts are a summary, so describe overall outgoings and income rather than individual transactions. They are made up of several parts:

The Statement of Financial Position and the Footnotes will be published by Companies House for general viewing.

Producing your statutory accounts is also an invaluable way for you as business owner to understand your day-to-day operational costs and all the other key aspects of your business's finances.

What’s the deadline for financial reporting?

As you are submitting different documents to two different authorities, there are several deadlines to keep track of.

You’ll notice that the deadline for paying corporation tax is shorter than the one for filing your Company Tax Return – so your company might pay tax before submitting its tax return.

This may seem strange, but your accountant will be able to estimate how much tax is due, and any overpayments can be sorted out later.

Nevertheless, it is good practice to submit your tax return in good time and not wait for the deadline, to ensure you pay the right amount of tax.

What if I miss a deadline for year end reporting?

There are penalties for late reporting or payment of tax, both from HMRC and Companies House.

Your company can even be struck off the register for failing to report, so take your obligations seriously.

You'll receive an automatic penalty notice if you are late in filing your accounts, and will have to pay a fine depending on how late they are, as shown below:

What other reporting duties do I have?

There are other reporting duties which, although not technically part of year-end reporting, can be done at the same time for the sake of convenience.

These are your VAT returns (if the company is VAT-registered) and your Confirmation Statement.

VAT returns

Your VAT return (if you need to submit one) will probably be due at your financial year end, so it makes sense to roll this process into your year-end reporting activities.

Confirmation Statement

By law you must confirm your company information with Companies House on an annual basis (failure to do so may be deemed a criminal offence).

You must file the statement within 14 days of its due date, which is a year after either your incorporation date, or the date of the previous statement. You must do this even for a dormant company.

Year end accounting checklist

Your year end financial reporting should proceed without a hitch if you follow these tips every time.

1. Do your preparation

Give your company enough time and space to prepare for the year end.

At least a month in advance, put your staff on a ‘year-end footing’ so they go the extra mile to chase orders and invoices, file expenses, reduce expenditure and check they have all necessary documents in easy reach.

2. Gather your paperwork

Remember your accounts will need to be backed up by records: income records, bank statements, statements of account from suppliers, invoices and receipts.

Round up all your paper and online documents, so you’ll be ready if any part of your financial reporting is challenged.

3. Chase overdue payments

Unpaid invoices cause a headache at the year-end, so get tough on your debtors well before the reporting deadline and bank as many payments as you can.

This ensures accurate accounts (and also saves you from paying tax on money you don’t have yet).

4. Sort out your expenses

Expenses reduce your profits, which means you pay less corporation tax, so keep careful track of everything you spend.

Anything the company has bought ‘wholly and exclusively’ for business use can be claimed as an expense on your Company Tax Return.

5. Cross-check accounts against your records

Make sure that all the figures in your accounts and tax return match the figures in your supporting documents (bank statements, invoices etc.)

Also make sure that sales made but not yet paid for are listed as outstanding debts owed, rather than as revenue. Make a note of any invoices where there is a risk of no payment.

6. Update your employee data

Recruitment happens year-round, so it’s easy to make mistakes with employee-related figures such as payroll, benefits and expenses.

Make sure all information on your staff is up to date, as you’ll be liable for mistakes relating to tax or National Insurance. If any employee claims expenses, insist that they provide the correct receipts.

7. Make back-ups

Financial year-end reporting involves a lot of data and a great deal of effort to organise, so make regular backups of your accounts and tax return in progress.

This way if you lose any data, you can pick up from where you left off.

8. Finally: hire a great accountant

The simplest way to achieve smooth and accurate year-end reporting is to engage an experienced accountant who can get to know your business in depth.

Choose one you can relate to well on a personal level, as the year-end can be pretty full-on and you both may need a sense of humour.