All companies and self employed businesses including dormant non trading companies have a legal requirement to keep a set of annual financial accounts for tax purposes. There are rules governing the accounting year end date at which the set of accounts is made up which have advantages and disadvantages to the business.
When a private limited company is incorporated companies house advise the company of the accounting reference date and a set of financial accounts are required to be made up and submitted from the day of incorporation to this accounting reference date. The accounting reference date is set by companies house as the last day of the month 12 months after the date of incorporation.
For example a company registered on 7 January would have an accounting reference date of 31 January the following year. Financial accounts are required for the period from 7 January one year to the 31 January the following year.
The financial accounting period for a limited company which has been trading in previous years starts on the day after the accounting reference date and continues until the next accounting reference date. In the example above the final accounts including profit and loss account, balance sheet and notes to the accounts including audit report where required would be prepared from 1 February until 31 January.
The accounting reference date can be changed by a limited company by sending to companies house form 225. There is a time limit on when the form can be submitted which in any financial year is the day before the accounts are due for delivery to companies house.
There are a number of reasons why the directors of a limited company might wish to change its financial year end although in the vast majority of cases the financial year is not changed.
Common reasons for changing the financial year end date would be to bring the year end date into line with other business interests such as an associated company. Seasonal and trading factors may make one month end more appropriate or the company might wish more time to prepare a particular set of final accounts although it can be a problem if the date is changed more than once in a 5 year period.
A significant reason for changing the financial year end of a limited company would be to bring the company financial accounting period into line with the tax year as tax rules change from year to year and accounting and tax alignment simplifies the tax calculation as only one years tax rules would apply instead of two tax years rules when the tax year end is straddled.
For limited companies in the UK the practise in recent years has been for tax rules and capital tax allowances changes to be announced in the budget each year which is the third week of March and the tax rules to be applied from the 1 April the following year. An accounting year in line with the tax year end would then be 1 April to 31 March each year.
A new private company filing its first set of annual accounts must do so within 22 months of incorporation. In subsequent years the financial accounts need to be submitted to companies house within 10 months of the company accounting reference date. Companies house normally send a reminder of when the accounts need to be filed 6 to 8 weeks prior to the deadline date.
Companies house automatically impose an escalating scale of civil penalties on private companies for the late filing of the annual accounts as follows
Up to 3 months late the penalty fine is 100 pounds
Over 3 months and up to 6 months the penalty fine is 250 pounds
Over 6 months and up to 12 months the penalty fine is 500 pounds
Over 12 months the penalty fine is 1000 pounds
The accounting documents to be sent to companies house which are required to be prepared in a specific format and in addition to stating the registered office of the company and the company registration number for identification purposes must also send
Profit and loss account or income and expenditure account for a non profit organisation.
Balance sheet signed and dated by a company director stating the company asset and liabilities balances.
Directors report signed by a director or company secretary describing the companies activities and also including for companies not classified as small and exempt a business review of future performance.
Auditors report signed by the auditor unless the company is exempt from audit under the small companies exemption rules.
When a small private company submits abbreviated accounts and takes advantage of the exemptions then the accounts must also contain the statutory statements as notes to the accounts advising the basis and exemptions under which the annual accounts have been prepared.