Limited companies are required to submit financial reports when the accounting year comes to an end. They must inform HMRC and Companies House when year-end arrives, which is usually in April. This is legally required for tax compliance and the information must be accurate as it will be provided to banks, the public, potential investors and current shareholders.
The end of a company’s accounting period is known as ‘year end’. It tends to follow the anniversary of the date the firm began trading, though many like to synchronise it with the tax year which runs from April 6 to April 5. Limited companies are tax-efficient, making them a popular choice for business owners. But preparing for year-end can be a hassle for many if they don’t do it right. As we approach the end of the tax year, now is a good time to start making preparations. Get it right, and everything will go much smoother.
What information must be included in a year-end report?
Financial year-end reports deliver valuable information about the financial status of your business throughout the accounting period. You must include your Tax Return and Statutory Accounts in your submission. Please note that, in your company’s first accounting period, it might take a bit longer than a year. In such cases, you will need to file a second tax return to the account.
Company Tax Returns
The Company Tax Return (CT600) must be submitted to pay tax. You must provide things like:
- Tax allowances.
The details of these things will be included in the Statutory Accounts and form the basis of your corporation tax bill.
These are sometimes referred to as your Annual Accounts. They lay out your organisation’s financial operations for the year. Producing these accounts also helps get a full picture of your day-to-day operational costs and other key financial factors that business owners should be aware of.
Essentially, they are a summary that describes total income and outgoings instead of individual transactions. They consist of the following:
- Income Statement: This details your loss or profit through the accounting period.
- Statement of Financial Position: This ascertains the total current value of your company, incorporating a balance sheet, profit and loss statement, account notes and an accountant’s report.
- Director’s Report: For larger companies, a report on the state the company is in must be submitted by the directors’ board.
The Company Tax Return is filed with HMRC. The Statutory Accounts must be filed with Companies House.
Challenges In Year-end Accounting?
There are various challenges to face when preparing for year-end. Some of the common struggles include:
- Missing Receipts/Invoices: If you don’t keep track of receipts and invoices throughout the year, these gaps can cause delays in reconciliation and other tasks.
- Human Error: When humans are responsible for processing complex documents in large volumes, mistakes start to creep in. Even a simple error can make a big difference in reporting.
- Manual Data Entry: Entering data into spreadsheets by hand is time-consuming, tedious and open to human error.
- Inefficient Communication: Expect to chase employees down for key information about specific transactions. This can be frustrating and unproductive for everyone involved.
When are the deadlines for financial year-end reporting?
Remember that you are completing different documents for two separate authorities. As such, there are various different deadlines for you to stay on top of:
- Companies House: Sending your first accounts. The deadline for this is 21 months after the registration of your company.
- Companies House: Sending subsequent annual accounts. No more than 9 months after the end of your company’s financial year.
- HMRC: Paying corporation tax or informing HMRC that you have nothing to pay. This must be done no more than 9 months and 1 day after the accounting period ends.
- HMRC: Submitting a company tax return. The deadline is 12 months after the end of the accounting period it covers.
You may notice the corporation tax deadline is actually shorter than the deadline for completing a Company Tax Return. As such, you may need to estimate the tax due and resolve overpayment at a later date. It is wise to file the tax return early rather than waiting for the deadline.
What are the consequences of missing a deadline?
Both Companies House and HMRC impose fines for missing filing deadlines. These fines get larger with time, so good planning is important to avoid large costs.
A company can even be removed from the register as a consequence of not reporting, so you must take these obligations seriously. A penalty notice will be issued if you miss a deadline. The fines increase in the following increments:
- Up to 1 month late: £150.
- 1-3 months late: £375.
- 3-6 months late: £750.
- 6+ months late: £1,500.
Top Tips For Year-end Accounting
Follow these simple steps to keep the hassle to a minimum with your year-end accounting.
- Make time for pre-planning preparation. You should have records for everything at least a month in advance. Obtain account statements from suppliers and get copies of any records of revenue received. Doing all the chasing early on will mean the documents are there when you need them.
- Get everything together. Supporting documents are necessary for accounts, so all your bank statements, invoices, income records and receipts need to be present. Gather all this, including electronic documents, so that your financial data is to hand if there is a dispute.
- Retain company records for at least 6 years after the end of the relevant accounting period.
- Chase debts. Unpaid bills can be problematic at year-end. Chase your debtors ahead of time so that your bank can be credited with as many payments as possible.
- Do your expenses housekeeping. Declaring business expenses reduces your Corporation Tax liability. So be sure to report as many valid expenses as possible.
- Get on top of your payroll. Errors in payroll, benefits and expenses can occur and may lead to errors in tax or NI calculations. Check and double-check.
All of the above is much easier if it’s kept on top of on a monthly basis throughout the year. By taking the time to create month-end accounts and closing each month of swiftly, the process at the end of the year will be much simpler and far more accurate.
What can be done to make year-end easier?
Good accounting software can make all of the above far easier. It will store records of all transactions on the go so that they are ready for year-end. It will also automate many of the data entry processes that would otherwise have to be done manually, with maximum accuracy and efficiency.
Moreover, they make it easy to submit in compliance with Making Tax Digital and give you access to a wide range of technologies designed specifically for your industry and the things that are important to your business.
There are many options to consider for accounting software. It’s an important decision because you need a solution capable of meeting your accounting needs now and in the future. Help is available for business owners struggling to settle on the ideal solution for them.
Preparing for year-end doesn’t have to be an enormous headache. The advice in this article details what you have to do and gives you some tips to streamline the process and ensure everything is accurate. The worst thing you can do is to leave everything to the last minute. Take advantage of technology and follow the advice for best practices in preparing for year-end.
Get your planning right and stay on top of your records throughout the year with accounting technology and good strategy. This will streamline all the processes and free you up to focus on your business and prepare for another successful year.
Why choose Eventura as your accounting/ERP implementation partner?
Eventura has been providing robust business and accounting solutions to countless organisations for over two decades. We are ERP experts and can identify all of your business needs, and deliver a comprehensive ERP solution that works to make accounting and daily business processes more efficient.
As Sage 200 Partners and NetSuite Solution Providers, we can help you identify which solution will fit your business needs the best. Our expert team of business analysts, developers, consultants, technicians and support staff can guide you through your entire project, from initial scoping through to implementation and on-going support.
We’re also managed IT service providers meaning we can help you identify your entire IT infrastructure requirements from day one. If you would like to speak to one of our ERP experts to discuss your options or request a free demo, you can request a free call back here.