Setting up business as a limited company has numerous advantages, including having a limited liability if the company should experience financial problems and in many cases, a reduced tax bill.
There are other advantages to forming a limited company, although the administration is demanding. Documents have to be prepared and submitted in a timely manner to avoid receiving a penalty. Documents have to be filed with both Companies House and HM Revenue & Customs.
A private limited company must prepare full statutory accounts at the end of its financial year. In simple terms, the accounts must be submitted to Companies House, a Company Tax Return submitted to HMRC and any Corporation Tax which is due must be paid by the relevant deadline. There are strict deadlines to be adhered to; the company accounts must be submitted by the end of nine months following the end of the company’s financial year. A Company Tax Return must be filed 12 months following the end of the company’s financial year and Corporation Tax has to be paid in full nine months and one day after the company’s financial year end.
At the end of the financial year, statutory accounts have to be prepared using financial records of the company. A copy of the statutory accounts has to be sent to the shareholders, anyone who may attend the general meetings of the company, HMRC and Companies House. The only exception to sending statutory accounts to Companies House is if you are sending abbreviated accounts. Abbreviated accounts may be sent to Companies House if your company qualifies as a small company. To qualify, the company must have a turnover of less than £6.5 million, the balance sheet must show less than £3.26 million and the company must have 50 employees or less.
Statutory accounts include a balance sheet which indicates the value of everything owned by the company and anything owed by the company on the last day of the financial year. A profit and loss account should be included, showing sales, the profit or loss that year and running costs. An auditor’s report, in addition to a director’s report and notes about the account, needs to be included. The balance sheet has to be signed by a company director with their name printed.
If your private limited company meets the criteria for a small company, it can submit abbreviated accounts. The public won’t see as much information about your company if you submit abbreviated accounts. A small company doesn’t have to submit a copy of the director’s report and may also claim exemption so that the accounts of the company don’t require auditing.
HMRC needs a Company Tax Return to be submitted in a timely manner so that it knows how much Corporation Tax is due. A Company Tax Return is made up of a CT600, calculations and any documents supporting the calculations and the company’s statutory accounts. The Company Tax Return will include specified information to help calculate how much Corporation Tax is due. This information includes any capital allowances that you wish to claim, outstanding director’s loans, Research and Development relief if you are claiming it, any losses that you want to bring forward from the last accounting period and gains on assets.
If your accounts and Company Tax Return are for the same period, they can be sent at the same time to HMRC and Companies House. Preparing and submitting company accounts and a Company tax Return is a complex and time consuming task, which is why it may be beneficial to outsource.