Note on accounts and accounting reference dates |
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This is a thumbnail sketch of current requirements and should be only read in conjunction with professional advice or current legislation. Part One Accounting Reference DatesThe Financial Year for a new company will start on the day of incorporation of the company. All companies are required to produce annual accounts that set out the company`s activities and performance during the year. The period is called " The Financial Year" was also known as the "Accounting Reference Period". It is possible to shorten an accounting reference period as often as required and by as many months. There are however limitations on ones ability to extend the financial year:
Preparation and filing of accountsThe rules contained in this section will apply to all companies accounts irrespective of whether there are any exemptions that apply to the content. ALL LIMITED AND UNLIMITED COMPANIES MUST KEEP ACCOUNTS WHETHER THEY ARE TRADING OR NOT.
All limited and public limited companies must send their accounts into the registrar at Companies House. Certain categories of company dealt with later may be allowed to file "abbreviated accounts". Unlimited companies only need to prepare and submit accounts during an accounting period if the company is or becomes:
What period must the accounts cover?A company's first accounts cover the period starting on the date of incorporation, not the first day of trading. They end on the accounting reference date (ARD) or up to 7 days either side of that date. Subsequent accounts start on the day after the previous accounts ended. They finish on the ARD or up to 7 days either side of it. Time Scales for submissions of accounts to Companies HouseIn usual cases the following time periods are allowed:
If however during the course of a financial year the accounting reference period has been shortened, the time allowed is the longer of the nine/six months (depending on the company) from the year-end or three months from the date of the notice. If the first financial year is longer thаn twelve months then the time allowed to submit accounts is:
It is worth noting that the period of months corresponds to the date in the appropriate month, and therefore a private company with a financial year-end of the 30th November has until midnight on the 30th August to submit it's accounts to Companies House, and not the 31st August being the end of the month. If however the year- end is the 30th May then they have until midnight on the 28th February on the following year to submit their accounts as if there is no corresponding date in the relevant months. Can one get more time?If there is a special reason for doing so, you may apply to extend the time for delivering accounts to Companies House; for example, if there has been an unforeseen event which was outside the control of the company and its auditors. You should make the application in writing and deliver it before the normal filing deadline. It must contain a full explanation of the reasons for the extension and the length of the extension requested. Late AccountsIf the accounts are delivered late there is an automatic "penalty for late filing". The amount depends on how late the accounts are when they arrive and the rate varies between private and public companies. From 1st February 2009 the new penalties will imply for late filing of accounts:
Please note: if a filing deadline expires on a Sunday or Bank Holiday the law still requires accounts to be filed by that date. So you should ensure that they are posted in time to arrive before such a deadline. Approval/Signature of AccountsFor filing, the copies of the accounts must state the following:
Where the auditor is a firm the auditor’s report must state the name of the auditor and the name of the person who signed it as senior statutory auditor on behalf of the firm. On Receipt by Companies HouseAny documents or forms sent to Companies House are electronically scanned and stored as an electronic image, which is used as a working document. The original paper is filed. When business contacts look at a company's record they see the image reproduced on line or on microfilm. It is important the original should be legible so that a clear copy is produced. When you prepare a document:
Additional requirements for Community Interest Companies(CICs)Community Interest Companies must prepare and deliver to Companies House a ‘community interest company report’ made up to the same date as the accounts Small and medium-sized company exemptionsWhat are the conditions to qualify as a small company?A small company must meet at least two of the following conditions:
Public companies and certain financial services companies cannot qualify as small companies. Similarly, companies which are part of a group which has members who are public companies or financial services companies cannot qualify as small, except in certain circumstances. A small company can prepare and submit accounts according to special provisions in the Companies Act 2006 and the relevant regulations. This means that they can choose to disclose less information than medium-sized and large companies. A company cannot prepare and submit small company accounts if it is, or was at any time during the financial year, one of the following;
Can a company qualify as a small company every year?Generally, a company qualifies as small in its first accounting period if it fulfils the conditions in that period. In any subsequent periods a company must fulfil the conditions in that period and the period before. What are the conditions to qualify as a small group?To qualify as small, a group of companies must meet at least two of the following conditions:
What do small company accounts include? Generally, small company accounts prepared for members include:
The balance sheet must contain a statement in a prominent position above the director’s signature that the accounts have been prepared in accordance with the special provisions applicable to companies subject to the small companies’ regime. Are there special rules for small groups?Yes, a parent company which qualifies as small need not prepare group accounts or submit them to Companies House if the group is small and not ineligible. If you prepare group accounts they must contain a statement above the signature on the balance sheet, confirming that they are prepared in accordance with the provisions applicable to companies subject to the small companies’ regime. Which small companies qualify for audit exemption?To qualify for audit exemption, a company must
However, even if a small company meets these criteria, it must still have its accounts audited if a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares demands it; or - in the case of a company limited by guarantee - 10% of its members in number. Are all types of small companies eligible for the exemption?No. You must submit audited accounts to Companies House if the company falls into any of the following categories:
- a company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID (ie Markets in Financial Instruments Directive) investment firm or a UCITS (ie Undertakings for Collective Investment in Transferable Securities) management company; What does an audit-exempt company need to submit to Companies House?If a small company qualifies for audit exemption, it may submit unaudited accounts to Companies House in the form of an abbreviated balance sheet and notes or if it chooses full accounts. In either case, the balance sheet must contain the following statements above the director's signature: Audit Exemption StatementFor the year ending ………………(dd/mm/yyyy) the company was entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companies. Directors’ responsibilities:
How long do I have to deliver audit-exempt accounts to Companies House?You have the same time for filing both audited and audit exempt accounts, and the law imposes the same penalties as for late filing of all other accounts. How long do I have to deliver audit-exempt accounts to Companies House?You have the same time for filing both audited and audit exempt accounts, and the law imposes the same penalties as for late filing of all other accounts. What is a medium-sized company?As with a small company, a medium-sized company is determined by its turnover, balance sheet total (meaning the total of the assets) and average number of employees. A medium-sized company can prepare accounts according to special provisions applicable to medium-sized companies. It can also choose to submit reduced information to Companies House. Public companies and certain financial services companies cannot qualify as medium-sized companies. Similarly, companies which are part of a group which has members who are public companies or financial services companies cannot qualify as medium-sized for accounting purposes. What are the conditions to qualify as a medium-sized company?To be a medium-sized company, you must meet at least two of the following conditions:
Are any companies excluded from being treated as medium-sized? Yes. A company cannot be treated as a medium-sized company if it is, or was at any time during the financial year, one of the following:
Can a company qualify as a medium-sized company every year?Generally, a company qualifies as ‘medium-sized’ in its first accounting period if it fulfils the conditions in that period. In any subsequent period a company must fulfil the conditions in that period and the period before. What are the exemptions available for medium-sized companies?Medium-sized companies may omit certain information from the business review in their directors' report (that is, analysis using key performance indicators so far as they relate to non-financial information). Also a medium-sized company which is part of an ineligible group can still take advantage of the exemption from disclosing non-financial key performance indicators in the business review. Medium-sized companies preparing Companies Act accounts may omit disclosure with respect to compliance with accounting standards and related party transactions from the accounts they send to their members. Medium-sized companies preparing Companies Act accounts may choose to file a slightly reduced version of the profit and loss account What does a medium-sized company have to deliver to Companies House?Abbreviated accounts of a medium-sized company must include:
The special auditor's report should state that in the auditor's opinion the company is entitled to deliver abbreviated accounts in accordance with section 445(3) of the Companies Act 2006 . The balance sheet (and if appropriate, the directors' report) must contain a statement that the accounts have been prepared in accordance with the special provisions of section 445(3) Companies Act 2006 in regard to medium-sized companies. Are there special rules for medium-sized groups?No. A medium-sized parent company must prepare group accounts and submit them to Companies House. What is a dormant company?A company is dormant if it has had no 'significant accounting transactions' during the accounting period. A significant accounting transaction is one which the company should enter in its accounting records. When determining whether a company is dormant you can disregard the following transactions:
What are the conditions that a dormant company must meet to be exempt from audit?A dormant company is exempt from having an audit for that financial year if:
What exemption is available?Dormant companies can claim exemption from audit and need only prepare and deliver to Companies House an abbreviated balance sheet and notes. You do not have to include a profit and loss account and directors' report in dormant company accounts filed at Companies House, but you must provide a directors' report to members. A company may not take advantage of the dormant company audit exemption if at any time in the financial year in question it:
Nor can a company take advantage of the dormant company audit exemption if an audit is required by a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares; or - in the case of a company limited by guarantee - 10% of its members in number. A company is not entitled to the dormant company audit exemption unless its balance sheet contains the statements referred to it. What information must dormant company accounts contain?Dormant company accounts submitted to Companies House need not include a profit and loss account or directors' report. Unaudited dormant accounts are much simpler than those of a trading company but must contain:
What statements do I need to make on the balance sheet? If you submit your accounts to Companies House on paper, you must check that you have the following statements above the director's signature: Audit Exemption StatementFor the year ending ………………………. (dd/mm/yyyy) the company was entitled to exemption from audit under section 480 of the Companies Act 2006 relating to dormant companies. Directors’ responsibilities:
A private company that qualifies as small should also include the following statement on the balance sheet: These accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.How long do I have to submit dormant accounts to Companies House?You have the same time allowed for filing as for other accounts, and the same penalties for late filing apply. Partnership accountsWhat accounts must the partnership prepare?The partnership must produce audited accounts as if it were a company. The accounts must conform to the requirements of the Companies Act 2006 and related regulations. For what period must I prepare the partnership accounts?The accounts may cover any period up to 18 months which may be specified in the partnership agreement. If the partnership agreement does not specify a period, you must draw up the accounts for each 12 month period ending on 31 March in each year. When must I prepare the accounts?You must prepare the partnership accounts within a period of 9 months after the end of the financial year. Are there any penalties for non-compliance?Yes. Every partner in a qualifying partnership or every director of a company that is a partner may be prosecuted and fined up to £5,000. LLP Partnership’s Accounting Period and Tax YearAccounting period and its corresponding partnership tax return and tax return for partners could be different as the tax year ends on 5th April. It is advisable for the partnerships to end their accounting period on 5th April of each year so that both accounting period and tax year could end at the same time. For Example: If your accounting period is starting on 1s June 2009 and it is ending on 31th May 2010 then the first tax year would be from 1st June 2009 to the 5th April 2010. This means the partnership tax return and personal tax return of partners have to be submitted for 2009/10 tax year on or after 6th April 2010. Deadlines for partnership tax return and personal tax return of partners If you wish to submit online then deadline is 31st January of the following year. For Example 2009/10 online return must be submitted by 31st January 2011. If returns are not submitted on time to HMRC then the penalty will be charged to you.
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