Statutory accounts are a set of accounting and business reports that summarise a limited company’s financial performance over a 12-month period. They can also be referred to as ‘company accounts’ or ‘annual accounts’ which describes the nature of them – that they are a legal requirement for all companies to complete annually. It is therefore important to note that statutory accounts are only mandatory for limited companies and do not need to be completed by businesses that operate as sole traders.
Who needs to complete statutory accounts?
Directors of all UK registered limited companies are responsible for making sure annual accounts are completed accurately and submitted by the filing deadline. Whilst many directors and company owners choose to elect for an accountant to help with this obligation, they will still remain legally responsible for accuracy and timeliness of the accounts.
Why do companies need to complete statutory accounts?
Every year, all limited companies are legally required to complete statutory accounts. They are a crucial part of running a company because they make up part of the company tax return. Statutory accounts must therefore be submitted to HMRC once a year, as part of declaring how much corporation tax is due.
Statutory accounts also need to be filed with Companies House, so that correct and up-to-date information is kept on their database for public use. The purpose of the Companies House database is to allow the general public to access key company information such as ownership, registered office address, how long the company has been running for, and more. The intention is that by enabling the public to see such information, companies are encouraged to act responsibly, legitimately, and strive for high performance.
Finally, statutory accounts need to be supplied to all company shareholders or anyone else who is eligible to attend general meetings. Understandably, those with a vested interest in the company will want to keep track of its financial performance. Statutory accounts are often made up to a standard format, and this can make it easier for shareholders to understand and interpret the reports.
How to produce full statutory accounts
To produce a full set of statutory accounts you need to include several financial reports and business documents including:
- A balance sheet
- A profit and loss account to include the company director’s name and signature
- Any notes about the accounts
- A cashflow report
- A director’s report
- An auditor’s report
For more details and information on what these reports show you can read our dedicated article on how to prepare full statutory accounts.
What to do for your company’s statutory accounts
Although completing annual accounts is mandatory for all limited companies, the level of detail and what information needs to be provided is dependent on the size of your company. Full statutory accounts are therefore not necessary for all limited companies apart from the largest. HMRC defines the size of a company by three thresholds:
- Balance sheet total (the total of the company’s fixed and current assets)
- The average number of employees
At least two of the three thresholds need to be met to determine the size of a company.
Small companies are those with a turnover of less than £10.2 million, a balance sheet total of no more than £5.1 million and fewer than 50 employees. Small companies may be exempt from having to submit an audit report so long as a sufficient number of company members do not demand one. Where this is the case, small companies can simply submit unaudited accounts to Companies House with a statement to explain that the company qualifies to do so as a small company. Small companies also have the option as to whether or not to include a copy of the director’s report when submitting to Companies House.
Very small companies are classed as micro-entities. Micro-entities must have no more than £632,000 in annual turnover, less than £316,000 on the balance sheet and fewer than 10 employees. Like small companies, micro-entities are exempt from being required to provide an audit report and can choose to submit a director’s report if they wish. There are even fewer requirements for micro-entities as they do not have to provide a full balance sheet or profit and loss statement. Micro-entities can instead submit ‘abridged’ accounts which are only a sub-set of information that is included in a full balance sheet or profit and loss statement.
Medium-sized companies are defined as having an annual turnover of no more than £36 million, a balance sheet total of under £18 million and an average number of employees of no more than 250. They need to include a balance sheet, profit and loss statement, notes to the account, a director’s report and auditor’s report (unless exempt) to Companies House. They can, however, choose not to include non-financial information in the director’s report as well as a slightly reduced version of the profit and loss account compared to full statutory accounts.
If your company is dormant then you do not have to file statutory accounts with HMRC but will need to continue to send some information to Companies House. You do not have to submit a profit and loss statement because there should be no incoming or outgoing transactions. However, dormant companies do still need to file a balance sheet and notes to accompany it. Despite the allowances dormant companies have for filing dormant accounts to Companies House, they may still be required to fulfil any obligations it may have to prepare full accounts for its members.
When to file statutory accounts
One of the most important aspects of completing your company’s statutory accounts is filing them on time. Every company will have their own deadline which is dependent on the company’s accounting reference date. The accounting reference date is automatically set as the anniversary of the last day of the month from when you first registered the company with Companies House. Your filing deadline is then usually calculated as 9 months from your accounting reference date. The exception to this applies to your first filing of your statutory accounts only, where there is an extended time frame.
An example of statutory account deadlines:
- You incorporate your company on 16th July 2020
- Your accounting reference date will be 31st July for every year after your first filing. Your filing deadline is 9 months after the accounting reference date i.e. 30 April.
- Your deadline for filing your first statutory accounts with Companies House is 21 months from the date of incorporation so will be 15th April 2022
- The deadline for your second filing will be 30 April 2023 and will continue to be 30 April each year afterwards unless you decide to change the accounting period
You can choose to change your accounting period if needed. You can bring it forwards by as many months as you want, as frequently as you would like. However, you can only extend your year-end by a maximum of 18 months, only once every 5 years.
What happens if you miss the deadline for filing your statutory accounts?
If you are late filing your statutory accounts with Companies House, you are likely to have to pay penalties. You will receive automatic penalty notices which increase depending on how late you file them:
- Up to 1 month after the deadline is £150
- 1 to 3 months after the deadline is £375
- 3 to 6 months after the deadline is £750
- More than 6 months after the deadline is £1,500
These fines will double if your company accounts are late 2 years in a row. Not only that, but persistent failure to file your annual accounts may result in your company being struck off the register.
To ensure you are completing your statutory accounts accurately and to deadline, you may want to consider using our service. To discuss, you can complete the contact form below or call us directly on 01865 24 55 11.