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Annual Accounts Frequently Asked Questions
All UK companies must keep financial records and file annual accounts.
We have listed below answers to the more frequent questions that we are asked regarding company accounts. If you do not find the answer to your question below, or you would like a more detailed answer, please feel free to contact us. Our accountant will be pleased to assist you.
Accounting
Company Limited by Shares
What are the statutory reporting requirements and deadlines for a UK Ltd company?
- A full or abbreviated set of accounts must be filed at Companies House within ten months of the company’s year-end date
- A Corporation Tax return, Form CT600, must be submitted to the company’s local corporation tax office, along with a copy of the annual accounts, within twelve months of the company’s year-end date
How do I determine the company’s year-end date?
This is always the last day of the month in which the company was incorporated. So, for a company incorporated on the 15 th February, the company’s year-end date is set at 28 th February.
What is a company accounting period?
The period for which accounts will have to be made up and filed. This is an exact calendar year from the first day after the company’s’ year-end date; so, going by the above example, the company’s accounting period is 1 st March to 28 th February.
What does an annual set of accounts comprise?
Full
- Directors’ Report
- Profit and Loss Account
- Balance Sheet
- Notes to the Accounts; these disclose all details pertaining to the income, cost of sales and overheads of the company in the accounting period, as well as detail on loans, shareholdings etc
For an example set of standard Ltd full accounts, please click here
Abbreviated
- Balance sheet
- Balance sheet-relevant Notes to the Accounts
For an example set of standard Ltd abbreviated accounts, please click here
On what basis do I decide whether to file full or abbreviated accounts?
This is purely a matter for the directors’ discretion; there are no binding rules in favour of one form of disclosure or the other.
It may well be in the company’s current interest not to make full trading detail publicly available; however, the benefit of full disclosure lies in statutory authorities having comprehensive details of the company’s activities immediately to hand, lessening the likelihood of enquiries and investigations.
Can I choose to just file abbreviated accounts, without having a full set prepared?
No. A director must sign off a full set of accounts; only then can the abbreviated set be compiled and filed.
Is an independent audit compulsory for all UK Ltd companies?
No. For the UK tax year ending 5 th April 2007, the thresholds above which independent audit by a registered firm of auditors becomes compulsory are:
- A Balance Sheet showing net assets in excess of 2.8 million GBP
- A Profit and Loss Account showing annual turnover in excess of 5.6 million GBP
For an example set of audited accounts, please click here
Is there anywhere on the internet I can find a current record of the company’s status?
Yes. Visit www.companieshouse.gov.uk and follow the link on the right for WebCHeck, then enter the company’s details.
Accounting
Company Limited by Guarantee
What is the difference between a Company Limited by shares Ltd company and a company limited by guarantee?
With a company limited by guarantee, all profits must be retained within the business; they cannot be distributed to members in the form of drawings or dividends.
Also, the member’s exposure to any debts of the company on winding up are limited to the amount they agree to contribute as written down in the Memorandum of the company. The company is prohibited from issuing shares and thus creating shareholders.
Is the accounting treatment the same as for a standard Ltd company?
Yes; the balance sheet must show that any net profit from the profit and loss account has been retained within the business in the form of cash or purchase of assets; the profit and loss account must show all expenditure to have been restricted to non-remunerative, operational items.
Can a company limited by guarantee file abbreviated accounts?
No.
Is a company limited by guarantee obliged to organize an independent audit?
No; however, given that the majority are set up for charitable purposes, or non-profit making enterprises such as property management, they invariably end up undergoing an external audit.
For an example set of accounts for a company limited by guarantee, please click here
Accounting
Company Granted Charitable Status
Is an external audit compulsory for a company granted charitable status?
Yes.
Is the accounting treatment different to a standard Ltd company or company limited by guarantee?
Yes, quite different; far more detail and transparency regarding the movement of funds is required.
For an example set of accounts for a company granted charitable status, please click here
UK Taxation Rates
What are the current rates of UK Corporation Tax?
For the tax year ending 5 th April 2007:
Rates |
Lower Taxable Profits Limit (GBP) |
Upper Taxable Profits Limit (GBP) |
Rate (%) |
|
|
|
|
Small Companies’ Rate |
0 |
300,000 |
19.00 |
Main Rate |
300,001 |
no upper limit |
30.00 |
|
|
|
|
|
|
|
|
Marginal Relief |
Lower Taxable Profits Limit (GBP) |
Upper Taxable Profits Limit (GBP) |
Rate (%) |
|
|
|
|
|
300,001 |
15,000,000 |
11/400 |
What is the deadline for payment of any corporation tax to the UK Inland Revenue?
Nine months and one day from the company’s year-end date
What are the current rates of UK personal income tax (‘PAYE’ or Pay-As-You-Earn)?
For the tax year ending 5 th April 2007:
Lower Band Limit (GBP) |
Upper Band Limit (GBP) |
Rate (%) |
Rate Name |
|
|
|
|
0 |
5035 |
0 |
Personal Allowance |
5036 |
7185 |
10 |
Starting Rate |
7186 |
33540 |
22 |
Basic Rate |
33541 |
no upper limit |
40 |
Higher Rate |
What are the current rates of UK National Insurance deductions?
For the tax year ending 5 th April 2007:
|
|
GBP |
Annual Lower Earnings Limit - LEL |
|
4368 |
Annual Earnings Primary Threshold - PT |
|
5044 |
Annual Upper Earnings Limit - UEL |
|
33540 |
|
|
|
|
|
(%) |
Employee National Insurance Contributions |
Rate up to LEL |
0.00 |
|
Rate LEL to PT |
0.00 |
|
Rate PT to UEL |
11.00 |
|
Rate UEL and above |
1.00 |
|
|
|
Employer National Insurance Contributions |
Rate PT and above |
12.80 |
What are the current rates of dividend tax for UK tax-resident shareholders?
For the tax year ending 5 th April 2007:
|
% |
Within 33,540.00 GBP Basic Rate Income limit |
10.00 |
Above 33,540.00 GBP Basic Rate Income Limit |
32.50 |
UK VAT
What is the current rate of UK VAT?
17.5%.
What are my reporting obligations if I wish to apply for UK VAT registration?
On successful registration, the company is obliged to make a quarterly return stating total net (i.e. before VAT) sales and purchases, the VAT element thereof, along with the total value of sales to and purchases from other EU states.
In addition, a UK company selling to companies in other EU states is obliged to complete an EC Sales List each quarter, detailing the VAT numbers of those customers and the total value of supplies to each.
How long is my application for VAT registration for the company likely to take?
In general, 4-5 weeks from receipt.
How long do I have before I have to pay over any net VAT I’ve collected?
One calendar month from the end of the reporting quarter.
How long do I have to wait before a claim for VAT repayment is reimbursed?
Generally, three to four weeks from receipt of the quarterly return; however, for claims in excess of 2000.00 GBP, UK Customs & Excise may request further documentation in the form of original purchase invoices etc.
What is the current turnover threshold for UK registration?
Registration is only compulsory once UK-only sales turnover exceeds 61,000 GBP /year, or if turnover is likely suddenly to exceed 61,000 GBP in the next thirty days.
I intend to trade with companies in other EU states. Does UK VAT registration then become compulsory, irrespective of the amount of annual turnover of the business?
Yes.
What choice of methods do I have for accounting for VAT?
Credit
Total invoices received and issued in the period
Cash
Total cash paid or received in the period
Flat-Rate
A discounted rate of output VAT payable on sales income in exchange for waiving the right to reclaim VAT on purchases
Annual
Set monthly or quarterly instalment payments made throughout the company’s financial year, with any balance payable on an annual return
What are my obligations re provision of registered addresses, trading addresses etc?
The company must provide a separate VAT trading address from its registered address if it is to be considered a genuine trading entity.
The Company as Employer
I’m considering employing staff in the UK; how do I go about this?
The company must first be registered with the UK Inland Revenue as an employer; thereafter, it must make minimum quarterly declarations of the income tax and national insurance deducted from staff remuneration, and pay these over within two weeks of the quarter-end.
The annual tax quarters run as follows:
April 6 th – July 5 th
July 6 th – October 5 th
October 6 th – January 5 th
January 6 th – April 5th
Alternatively, the company can opt to make monthly declarations and payments, this frequency becoming compulsory if the amount of income tax and national insurance paid over per month exceeds 1,500.00 GBP.
At the tax year-end date of 5 th April, all employee remuneration and taxation must be accounted and signed for by a director on a form P35, and returned to the Inland Revenue by 19 th May. Any under-deductions and/or payments in the tax year must be made good by 19 th April.
What are my obligations as an employer re provision of registered addresses, trading addresses etc?
The company must provide a separate trading address from its registered address if it is to be considered a valid UK employer.
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