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Annual accounts preparation, also known as ‘statutory accounts’, are an important legal requirement of your business. It can take time and expertise to ensure your obligations are fulfilled and that all relevant information has been prepared and submitted.
This brief guide will give you an overview of the accounts you must submit to HMRC which form the basis for the company’s tax calculations. You must also file these with Companies House, details of what to prepare are included below.
What are statutory accounts?
The statutory accounts include a detailed balance sheet that depicts the value of all your possessions. Show your profit and loss accounts. This clarifies your company’s sales and other costs throughout the financial year.
Who has to file them?
All companies must prepare annual accounts: for shareholders, and for returns to HMRC and Companies House. Small companies generally do not require an audit if they satisfy any two of the following: annual turnover of less than £10.2m; total assets under £5.1m;50 employees or fewer.
Key points & legal requirements:
HMRC submission
· Statutory accounts are submitted online with the company’s tax return, within 12 months of your company’s financial year end.
· The tax becomes payable at nine months so accounts are normally submitted around this date.
Companies House submission
· The accounts you file become publicly available.
· The accounts must be submitted within nine months of your company’s year-end.
· The content of filed accounts is reduced for medium, small or micro-entity companies based on turnover, balance sheet assets and the number of employees.
· Further exemptions apply to micro-entities satisfying any two of the following: annual turnover of less than £632,000; balance sheet assets less than £316,000; 10employees or fewer.
· Most medium-sized companies (satisfying any two of the following: annual turnover of less than £36m; balance sheet assets less than £18m; 250 employees or fewer)can file slightly reduced accounts. These omit some of the detailed information required for large companies.
· Company directors are legally responsible for ensuring the accuracy of the accounts. Using an accountant does not reduce this responsibility.
Almost all companies use accounting software and the services of an accountant to prepare their accounts.
Being organised makes it relatively simple to provide the information your accountant needs. You can also use this information to review and improve your business operations.
What do I need to supply in a submission?
There are usually four main sections:
- A directors’ report, giving a business review and their view of the firm’s performance and prospects.
- A balance sheet, outlining the company’s financial position on the final day of the accounting period (the year-end). Essentially, this shows what the company owns and what it owes.
- A profit and loss account, showing the trading performance over the accounting period(usually 12 months). This summarises sales, costs and expenses, profits (or losses), and any tax charges.
- Notes, giving more details about the information in the balance sheet and the profit and loss account.
The Companies Act sets out how the accounts will be presented
The format should also comply with UK accounting standards, which dictate how certain transactions should be treated in the financial statements.
Directors have to make sure that financial statements give a ‘true and fair view’ of the company’s financial position.
What accounting records do I need to keep?
All companies are legally required to keep detailed accounting records of the following:
· income and expenditure
· assets and liabilities
· stock and any stock-takings used to work this out
· goods sold or purchased and who you deal with (except for retail transactions)
You must keep financial documentation to back up your tax return.
This can be kept in hard copy or electronic form and will include:
· records of all income and expenditure such as copies of orders, invoices and receipts
· other relevant information such as bank statements, cheque books and paying-in books
Almost all businesses must file their annual tax return online. Most businesses use an accounting software system to simplify this process and help minimise errors.
Can I prepare my statutory accounts myself?
It really depends on your existing skill set, understanding of legalities and accounting comprehension level – not to mention your available time to undertake such a task. You will need to consider how you will ensure it is well planned, provides everything required and is filed on time.
If you are in anyway unsure or are time poor it is highly advisable to use an accountant for this purpose. Our professional accountants can manage this for you with precise care. Sometimes it seems impossible to take time away from your business commitments to attempt all the technical work, especially if it is by yourself. We understand it can be difficult to manage everything alone. Especially, when you know that any mistake you cause will result in harsh penalties. A professional hand can keep these kinds of concerns away.
How do I plan for my statutory accounts?
Use an accounting software to simplify the process. Speak to your accountant to ensure you purchase the best software for your needs.
Ensure all figures add up correctly and tally with your invoices, bills, paying-in books and, most importantly, your bank statements.
Ask your accountant whether there are any tax-planning steps you should take. You may need to take-action before your company's year-end. For example, you may be advised to bring forward certain purchases, so that they count in the current accounting period.
What other information will I need to supply my accountant?
These are likely to fall into four key areas:
1. Purchases and sales
Your accounting records should be clear and logical as this saves time for everyone involved. Keep record-keeping simple and do it in a way that helps your business.
List sales made before the year end, but not yet paid for, as outstanding debtors. Include the amount, invoice number and invoice date.
List purchases made before year end, but not yet paid for, as outstanding creditors. Include the amount, the supplier’s name and the payment due date.
Note any invoices you dispute and do not expect to pay, with a brief explanation.
2. Stock and uncompleted work
The value of stock is a key element in retail and manufacturing businesses. It includes work-in-progress. Service businesses have little physical stock but may have considerable work in-progress, such as half-finished projects.
Unless stocks are a minor item, you will need to carry out a stocktake. This is a physical count-up of the goods on your premises. It is made easier and faster with careful planning.
Once the stock has been counted, it needs to be valued. This will be based on either the cost to you or the amount for which you expect to sell the goods, whichever is lowest.
Service providers are required to include partly completed work. This uses the stage-to-completion method. For example, if a contract is 75% complete, then 75% of the contract value would be included in the year-end accounts as uncompleted work.
Keep a list of:
· work you have started but haven’t yet invoiced
· the estimated sales value when the work is completed
· an accurate estimate of the percentage of the work you have completed. You can use time records, job costing or diaries to help you work out the percentage.
3. Fixed assets
Fixed assets include buildings(if you own them), equipment, vehicles, and ‘fixtures and fittings’ (e.g. shelving).
Keep a fixed-assets register, detailing all the assets that the company owns and keep the documents proving ownership.
Note any items that have been purchased, sold or scrapped during the year. Give your accountant a copy of relevant purchase or sales invoices or any other documents.
Small companies can get 100% relief when purchasing certain fixed assets, so it is important to speak to your accountant before any purchase.
4. Employees
Payroll and expenses claims are of particular interest to HMRC.
It is important to get calculations right, whether you or a payroll bureau handle this. The business is liable for incorrectly deducted tax and national insurance contributions (NIC), not the employee.
Keep records for all expense claims. Expenses claim forms make it easy to keep track of expenses. Employees attach the relevant receipts to the completed form, in order to receive reimbursement.
You no longer have to report these expenses on P11Ds, but HMRC must be satisfied that you reimburse nothing more than the legitimate costs incurred or an HMRC-approved flat rate. You will still need to keep records of any payments made.
Tax on benefits in kind can be paid through your payroll. You must register with HMRC and add the cash equivalent of the benefit to the employees pay through the payroll.
You don’t need to complete P11Ds but you must submit P11D(b)s to calculate NIC.
We can help you prepare your Statutory Accounts
It goes without saying that your accounts need to be accurate and prepared in accordance with relevant laws and accounting standards, but we also pledge to do this in the most efficient way with minimum time required on your part. We’ll also identify any opportunities or issues we find along the way and raise these with you at the earliest opportunity, to ensure you can capitalise on them or work to resolve them.
If you would like to find out more about how we can help lighten the load and manage your accounts preparation, speak to us today on 01322 555 442.
