COMPANY ACCOUNTS & TAX

  1. Year end statutory accounts

  2. Corporation tax

  3. VAT

Year end statutory accounts

What are they?

These are the legal accounts filed with Companies House on an annual basis. They will be on public record for UK companies.

It’s a legal filing containing the results for the company in a stated accounting period. Governed by accounting standards, it’s a much more rigid format than management accounts, with rules about how items have to be accounted for and full disclosure of decisions made and transactions that have occurred.

When do I do them?

Year-end accounts are typically due nine months after the company’s period end – that’s signed and filed at Companies House. If your company has shortened or extended the accounting period, it is likely that it will be different.

How are they done?

Fundamentally, keeping good accounting records throughout the year is key to a smooth process. Accounts are reviewed from a technical standpoint and the appropriate disclosures are made within the statutory accounts. The end result is a very different looking set of accounts than you will be used to if you have reviewed your management figures.

Once you are happy with the accounts, they are signed off and then filed with Companies House and HMRC. These accounts are very important for all due diligence reporting (fundraising, etc.) as well as for loan applications and general credit checks.

What are the common pitfalls?

Late submission of the accounts will attract late filing penalties starting at £150 and rising to £1,500 if they get over six months overdue.

It’s crucial that accounts are submitted on time, as Companies House is now an open, public record so anybody can look up your company. That means before VCs or potential backers even agree to see you, they will probably have looked you up online.

Corporation tax

The tax on profits paid by companies or the R&D credit from losses!

What is it?

All UK trading companies are subject to corporation tax and R&D tax credits are part of the corporation tax regime.

A company has a legal obligation to submit corporation tax return(s) (CT600s) every year. There is no ‘tax year’ for corporate tax returns – they follow the reporting period of the company’s accounts – but it can only be a maximum of a 12-month period.

So often, where the company is preparing an extended period of financial statements, there are two CT600s to be submitted.

When do I need to do them?

A company will typically receive a notification from HMRC to deliver a CT600. For example, assuming that a company’s year- end was 31 December, the company would have to prepare a return covering the period 1 January to 31 December.

Key dates – any tax payable is due nine months and one day after the end of the reporting period but the return does not have to be submitted until 12 months after the reporting period, so in this case 31 December of the following year.

How do I do them?

When you incorporate your company, HMRC will write to the address supplied and provide you with the company’s Unique Taxpayer Reference (UTR). You will need to get someone to look after the process and ensure that everything is submitted to HMRC in a timely manner!

What are the common pitfalls?

Getting the tax treatment in the accounts correct will drive the figures that calculate your corporation tax return so it is crucial to be on top of your P&L. Business spend and most entertaining expenses are not tax deductible so be aware of the basics.

VAT

Don’t upset the VAT man.

What is it?

VAT is levied on most goods and services provided by registered businesses in the UK. Selling outside of Europe is outside of the scope of VAT. Inside Europe, besides the basic reporting of input tax (what you purchase) and output tax (what you sell), there are several key requirements that affect many startups. Two of the most common are:

  1. VAT MOSS reporting – the supply of B2C digital sales.

  2. EC sales list – the supply of B2B sales to a customer in another European jurisdiction.

When do register?

All businesses that provide ‘taxable’ goods and services and whose turnover exceeds the registration threshold must register for VAT. You can register voluntarily if you are below the threshold, which is common for startups who are intending to trade and make taxable sales, as you can reclaim the VAT spend incurred to get to a point of trading.

Generally, returns need to be filed quarterly and payments, if applicable, made one month and seven days after the quarter.

Startup VAT returns are often repayments from HMRC as the business incurs more input VAT than output VAT. The returns can also be filled monthly or annually on request.

How do I do it?

Essentially, businesses charge and collect VAT on their applicable sales, offset any VAT payable on their applicable purchases, complete a return showing the net position quarterly (or in some cases monthly or annually) and either pay or reclaim this amount to or from HMRC.

What are the common pitfalls?

  • Surcharges, interest and penalties etc. are payable for late returns and/or late payment.

  • Don’t forget VAT MOSS and EC sales list reporting.

  • There are schemes that can be applied to to aid cash flow (cash scheme) and administration (flat rate scheme) but thought is needed to check this works for the business model and care should be taken to ensure these schemes are exited if the business reaches a certain size.

  • Importing/exporting as well as compliance with international regulations can be complex.

Back to services