Statutory Accounts and Corporation Tax: What every limited company owner needs to know

When you started your business did you expect that you would need an expert insight into the workings of Companies House and HMRC? Or, did you think you’d be able to spend more time doing something you love and getting paid for it? Our money’s on the latter. But we’d also be willing to bet the the ins and outs of Statutory Accounts and Corporation Tax are something that takes up more time than you would like. Unless you’re already an Accountancy Solutions client of course! With this in mind, this article takes a look at some of the important information you need to know about Statutory Accounts and Corporation Tax but written with you in mind…

Author: Simon Murrells   |   Date: 10th November 2020

What are Statutory Accounts?

In short, Statutory Accounts are the financial records relating to your company’s business activities through its financial year.

You are required to provide copies of the Statutory Accounts to your shareholders, Companies House, HMRC and anyone who can attend your general meetings.

Your Statutory Accounts must include a profit and loss statement for the relevant period, your company’s balance sheet for the last day of the financial year, notes as appropriate and a Directors Report (this doesn’t apply to micro businesses).

Depending on the size of your business, you may be exempt from providing audited accounts. You can find more information here. Similarly, if you are a micro-entity, small or dormant company you may be able to submit ‘abridged’ accounts to Companies House. You, or your accountant, should always check that your company meets the criteria for this.

Note: your Statutory Accounts are still required by HMRC as part of your company tax return. 

Your accounts must comply with the standards defined by International Financial Reporting Standards or New UK Generally Accepted Accounting Practice. Ensuring you comply with the required standards is just one of the reasons to use an appropriately qualified accountant.

You can find more information about Statutory Accounts here.

How do I know if I am a micro-entity or small business?

Your accountant should be able to guide you but it’s always wise to be well informed yourself.

For the purposes of your Statutory Accounts and Company Tax Returns you are a micro-entity if you have two of the following:

  • Annual turnover of £632,000 or less.
  • A balance sheet of £316,000 of less.
  • Have ten or less employees.

You are classified as a small business if you have:

  • Annual turnover of £10.2 million or less.
  • A balance sheet of £5.1m or less.
  • Have 50 employees or less.

What is Corporation Tax payable on?

You need to pay Corporation Tax on the profits that your company has made. For example, the trading profits made from your day to day business activities, from investments made by the company and from selling assets for more than they cost.

How much is Corporation Tax?

Corporation Tax on your trading profits is 19%, There are some tax reliefs available if your business meets specific criteria as set out here.

Maximising what you are able to claim, and ensuring that your business is as tax efficient as possible whilst being compliant, is just one reason to ensure you engage an expert who is always up to date with current rules and regulations to help you with your business finances.

How and when do you need to file your returns?

The primary method for filing your returns is online. In some cases you may still be able to file a paper return but you must have a ‘reasonable excuse’ for not filing online and your deadlines may be different. You can find out more here.

You can file with Companies House and HMRC at the same time (this is usually the case and is more convenient) or you can do them separately.

Your first set of accounts must be filed within 21 months of registering with Companies House. Thereafter, your annual Statutory Accounts must be filed 9 months after your company’s financial year end. You must file your company tax return up to 12 months after the accounting period ends and you must pay your Corporation Tax by no later than nine months and one day after the end of your financial year. Penalties for filing can be found here.

As a limited company director, you are allowed to engage people to help you discharge your legal obligations. However you remain legally responsible for compliance.

Need more help with your Statutory Accounts or Tax Return?

When it comes to your Statutory Accounts and Corporation Tax, if you get things wrong you will quickly run into trouble. The easiest way to ensure you stay on the right side of HMRC is to enlist an expert to help. You’ll save yourself time, stress and sleepless nights, and have the peace of mind that your business accounts are compliant.

The team at Accountancy Solutions are experts who spend every day helping business owners like you to discharge their duties legally and efficiently.

To find out how we can help you, simply drop us an email.

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