To remain legally compliant as a business, you must file statutory accounts. If you own a small to medium business, you can choose how you’d like to file your accounts. This can either be as a full set of accounts, such as annual accounts or statutory accounts, or you can send abridged accounts. Abridged accounts contain reduced details while maintaining Companies House and HMRC compliance requirements.
In this article, we discuss the information that must be included in statutory accounts and what to look out for. They must be submitted to HMRC each year as they declare how much corporation tax your business owes. As statutory accounts are an integral part of your business operations, understanding them is crucial to remain on the right side of Companies House.
A page that includes the name and registered number of your company, registered office address, and director/s and accountant names must be included in statutory accounts.
A directors report must be included in statutory accounts, outlining the main activities of the business in question. The company’s performance and business prospects must be included in this report, along with dividends paid to shareholders.
The report must list each director by name throughout the reporting year, along with a brief outline of their responsibilities in the business. It must be signed by a director, as well as a letter or statement that the entire board has approved.
Many business owners find that the director’s report is a great way to review the past year of the business, how it’s performing financially, and the prospects for the following financial year.
If your business has a turnover below £10.2 million or has £5.1 million or less declared on the balance sheet, as well as no more than 50 employees, you don’t need to provide this report in your statutory accounts.
Part of your statutory accounts consists of a balance sheet, which shows the value of all assets that your business has ownership of, as well as money paid and any money owed. Included in the balance sheet are figures that relate to the reporting year as well as the previous year, each with explanations via the Notes page that must be numbered or referenced.
Included in the balance sheet are the following items:
The balance sheet must be signed by a director, with an attached statement of board approval. When reviewing figures with shareholders, it’s important to pay close attention to the businesses’ current cash position and how much is available in the business at present.
Something to look out for are the trade debtors, how much customers owe to your company, and how much you may owe to suppliers, also known as trade creditors.
Your cash position weakens the more customers owe the higher amounts. If you spot this as a problem in your business, you may wish to put tighter payment terms in place in order to solve this. You can carry out a similar course of action to your suppliers.
Within your statutory accounts should be a profit and loss account showing the profits of your business. This is calculated by your sales minus costs incurred. Included should be:
It’s paramount that you include the EBITDA, which is pre-tax profit. It’s also known as tax depreciation and amortisation, or ‘earnings before interest’.
While smaller companies are exempt from cashflow statements, larger companies must provide one in their statutory accounts. It’s also a great way to analyse the business and identify ways to improve the cashflow.
The statement itself should show any money coming into the business and funds going out. This can include:
This part of your statutory accounts submission consists of notes in order for you to provide a higher level of detail to your profit and loss account or balance sheet.
You must include the following:
It’s worth being aware that creditors can be split into deferred income, trade creditors, taxes and ‘other’. Any significant transactions should be expanded on in these notes.
Twenty-one months from your registration to Companies House, your first accounts must be filed. Following that, you have nine months to file once your company’s financial year accounting period has ended.
If you pass the filing deadline, you could be slapped with a fine of up to £1,500, depending on the delay.
All public limited companies (PLC), private limited companies (LTD), and limited liability partnerships (LLP) must submit statutory company accounts at the end of their reporting period. Smaller businesses can opt to submit a set of abridged accounts to Companies House. However, they must still generate a full set of accounts for shareholders/company members and HMRC.
Companies and LLPs have nine months from the end of their financial year to file statutory accounts with Companies House.
Understanding the difference between management accounts and statutory accounts can help you use them to effectively manage your financials and the ongoing success of your business (and beyond!).
Here are the main differences between the two:
There is a lot to take into consideration when preparing statutory accounts. The first is to ensure that the UK GAAP regulations are met.
Limited companies must include the following in their yearly financial accounts.
In some cases, an auditor’s report and a director’s report must also be included, but this is dependent on the size and position of your business.
Depending on whether businesses classify as small companies, dormant companies, or micro-entities, there are different rules for annual accounts.
Small companies that have a turnover of under £10.2 million, under £5.1 million on their balance sheet, or 50 employees or less, can send a set of abridged account accounts instead of statutory accounts with a simpler balance sheet. If you would like to find out if you’re classed as a small company, reach out to use below.
Small companies that meet two or more of the below criteria are considered micro-entities:
Very small companies, i.e. micro-entities, can send simpler statutory accounts to Companies House with less information on the balance sheet. Micro-entities also receive the same exemptions that small companies do.
Small, dormant companies don’t need to be audited or submit an auditor’s report.
As statutory accounts must be submitted correctly, and they are often complicated, it’s definitely worth seeking the help of a professional chartered accountant. We’re waiting to assist you, so click below to get started with us.
Our team of expert chartered accountants have helped numerous business owners, both smaller and larger companies, hand over the reins of their taxes. This leaves them able to focus on what matters most; their business.
Whether you need assistance with year-end accounts, full statutory accounts, corporation tax return tasks, auditor’s report services, dormant accounts, financial reports, small company tax return services, or even helping to prepare simpler accounts for Companies House – TaxBite can help. Get in touch with us below.
Get in touch