Note on accounts and accounting reference dates

This is a thumbnail sketch of current requirements and should be only read in conjunction with professional advice or current legislation.

Part One Accounting Reference Dates 

The Financial Year for a new company will start on the day of incorporation of the company. All companies are required to produce annual accounts that set out the company`s activities and performance during the year. The period is called " The Financial Year" was also known as the "Accounting Reference Period".

The period of a company`s first accounts. 

When a company is first formed, the first financial year automatically commences on the last day of the month in which the company was formed. For example a company formed in November 2009 would have its financial year calculated to cover the period from incorporation to the 30th November 2010. This date may vary up to seven days either side or the original date.

Changing the accounting reference date 

An accounting reference date may be changed by sending a particular form to Companies House but any new date must be filed before the deadline before the filing of accounts. A private company normally has nine months from the end of its financial year to submit accounts and a public limited company has six months to send accounts to Companies House. For the first year of trading the time period is calculated slightly differently.

It is possible to shorten an accounting reference period as often as required and by as many months. There are however limitations on ones ability to extend the financial year:  

• it may not be extended for a period lasting longer than eighteen months from the commencement of the financial year.
• It can not be extended more then once in five years unless:
  • The company is under administration, or 
  • It has been directed by the secretary of state, or 
  • The company is matching its financial year to that of a subsidiary or parent formed and operating within the EEC.

Preparation and filing of accounts

The rules contained in this section will apply to all companies accounts irrespective of whether there are any exemptions that apply to the content. ALL LIMITED AND UNLIMITED COMPANIES MUST KEEP ACCOUNTS WHETHER THEY ARE TRADING OR NOT.

Accounts will include the following:

• A profit and loss account (this shows income and expenditure/receipts and payments)
• A balance sheet which must be signed by a director
• An auditor's report signed by the accountant/auditor (if required)
• A director's report signed by an officer (i.e. director or secretary of the company)
• Notes to the accounts
• Group accounts (if appropriate)

All limited and public limited companies must send their accounts into the registrar at Companies House. Certain categories of company dealt with later may be allowed to file "abbreviated accounts". Unlimited companies only need to prepare and submit accounts during an accounting period if the company is or becomes:

• The subsidiary or a parent of a limited undertaking ,or
• A banking or insurance company (or the parent of the same),or
• Each of the company’s member was
  • A limited company;
  • Another unlimited company each of whose members was limited company; or
  • A Scotish partnership each of whose members was a limited company.

What period must the accounts cover?

A company's first accounts cover the period starting on the date of incorporation, not the first day of trading. They end on the accounting reference date (ARD) or up to 7 days either side of that date.

Subsequent accounts start on the day after the previous accounts ended. They finish on the ARD or up to 7 days either side of it.

Time Scales for submissions of accounts to Companies House

In usual cases the following time periods are allowed:

• For a private limited company – nine months from the financial year-end of accounting reference date.
• For a public limited company – six months from the financial year-end.

If however during the course of a financial year the accounting reference period has been shortened, the time allowed is the longer of the nine/six months (depending on the company) from the year-end or three months from the date of the notice.

If the first financial year is longer thаn twelve months then the time allowed to submit accounts is:

• For a private company twenty one months from date of incorporation or three months from the financial year-end whichever is the longer.
• For a public company eighteen  months from the date of incorporation or three months from the financial year-end, whichever is the longer.

It is worth noting that the period of months corresponds to the date in the appropriate month, and therefore a private company with a financial year-end of the 30th November has until midnight on the 30th August  to submit it's accounts to Companies House, and not the 31st August being the end of the month. If however the year- end is the 30th May then they have until midnight on the 28th February on the following year to submit their accounts as if there is no corresponding date in the relevant months.

Can one get more time?

If there is a special reason for doing so, you may apply to extend the time for delivering accounts to Companies House; for example, if there has been an unforeseen event which was outside the control of the company and its auditors. You should make the application in writing and deliver it before the normal filing deadline. It must contain a full explanation of the reasons for the extension and the length of the extension requested.

Late Accounts

If the accounts are delivered late there is an automatic "penalty for late filing". The amount depends on how late the accounts are when they arrive and the rate varies between private and public companies.

From 1st February 2009 the new penalties will imply for late filing of accounts:

Failing to deliver accounts on time is also a criminal offence for which company directors may be prosecuted.

Please note: if a filing deadline expires on a Sunday or Bank Holiday the law still requires accounts to be filed by that date. So you should ensure that they are posted in time to arrive before such a deadline.

Approval/Signature of Accounts

For filing, the copies of the accounts must state the following:

• the copy of the balance sheet must state the name of the director who signed it on behalf of the board;
• the copy of the balance sheet must be signed by a director;
• the copy of the directors' report must state the name of the director or company secretary who signed the report; and
• if the company has to attach an auditor’s report to the accounts, the copy of the auditor’s report must state the auditor’s name.

Where the auditor is a firm the auditor’s report must state the name of the auditor and the name of the person who signed it as senior statutory auditor on behalf of the firm.

On Receipt by Companies House

Any documents or forms sent to Companies House are electronically scanned and stored as an electronic image, which is used as a working document. The original paper is filed. When business contacts look at a company's record they see the image reproduced on line or on microfilm. It is important the original should be legible so that a clear copy is produced.

When you prepare a document:

• use black ink or black type;
• use bold lettering (some elegant thin typefaces and pens give poor quality copies);
• don't send a carbon copy;
• don't use a dot matrix printer;
• remember - photocopies can result in a grey shade that will not scan well;
• use A4 size paper, portrait format,  with a good margin; and
• include the company number in the top right-hand corner of the first page.

Additional requirements for Community Interest Companies(CICs)

Community Interest Companies must prepare and deliver to Companies House a ‘community interest company report’ made up to the same date as the accounts

Small and medium-sized company exemptions 

What are the conditions to qualify as a small company?

A small company must meet at least two of the following conditions:

• annual turnover must be not more than  £6.5 million;
• the balance sheet total must be not more than £3.26 million;
• the average number of employees must be not more than 50.

Public companies and certain financial services companies cannot qualify as small companies.  Similarly, companies which are part of a group which has members who are public companies or financial services companies cannot qualify as small, except in certain circumstances.

A small company can prepare and submit accounts according to special provisions in the Companies Act 2006 and the relevant regulations.  This means that they can choose to disclose less information than medium-sized and large companies.

A company cannot prepare and submit small company accounts if it is, or was at any time during the financial year, one of the following;

• a public company;
• a member of an ineligible group (see below);
• an authorised insurance company, a banking company, an e-money issuer, a MiFID (i.e. Markets in Financial Instruments Directive) investment firm or a UCITS (i.e. Undertakings for Collective Investment in Transferable Securities) management company or carried on insurance market activity.

Can a company qualify as a small company every year?

Generally, a company qualifies as small in its first accounting period if it fulfils the conditions in that period.  In any subsequent periods a company must fulfil the conditions in that period and the period before.

What are the conditions to qualify as a small group?

To qualify as small, a group of companies must meet at least two of the following conditions:

• aggregate turnover must be not more than  £6.5 million net (or £7.8 million gross);
• the aggregate balance sheet total must be not more than £3.26 million net (or £3.9 million gross); and
• the aggregate average number of employees must be not more than 50.

What do small company accounts include?

Generally, small company accounts prepared for members include:

• a profit and loss account;
• a full balance sheet, signed by a director;
• notes to the accounts; and
• group accounts (if a small parent company chooses to prepare them).
• a directors' report; and
• an auditor report (unless the company qualifies for exemption from audit and takes advantage of that exemption).

The balance sheet must contain a statement in a prominent position above the director’s signature that the accounts have been prepared in accordance with the special provisions applicable to companies subject to the small companies’ regime.

Are there special rules for small groups?

Yes, a parent company which qualifies as small need not prepare group accounts or submit them to Companies House if the group is small and not ineligible.  If you prepare group accounts they must contain a statement above the signature on the balance sheet, confirming that they are prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.

Which small companies qualify for audit exemption? 

To qualify for audit exemption, a company must

• qualify as small;
• have a turnover of not more than £6.5 million; and
• have a balance sheet total of not more than £3.26 million.

However, even if a small company meets these criteria, it must still have its accounts audited if a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares demands it; or - in the case of a company limited by guarantee - 10% of its members in number.

Are all types of small companies eligible for the exemption? 

No. You must submit audited accounts to Companies House if the company falls into any of the following categories:

• a public company unless the company is dormant ;
• a company that at any time in the financial year in question was:

          - a company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID (ie Markets in Financial Instruments Directive) investment firm or a UCITS (ie Undertakings for Collective Investment in Transferable Securities) management company;
           - a company that carries on insurance market activity; or
           - a special register body or an employers' association.

What does an audit-exempt company need to submit to Companies House?

If a small company qualifies for audit exemption, it may submit unaudited accounts to Companies House in the form of an abbreviated balance sheet and notes or if it chooses full accounts.  In either case, the balance sheet must contain the following statements above the director's signature:

Audit Exemption Statement

For the year ending ………………(dd/mm/yyyy) the company was entitled to exemption from audit under section 477 of the Companies Act 2006 relating to small companies.

Directors’ responsibilities:

• the members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476, 
• the directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts
• these accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.

How long do I have to deliver audit-exempt accounts to Companies House?

You have the same time for filing both audited and audit exempt accounts, and the law imposes the same penalties as for late filing of all other accounts.

How long do I have to deliver audit-exempt accounts to Companies House?

You have the same time for filing both audited and audit exempt accounts, and the law imposes the same penalties as for late filing of all other accounts.

What is a medium-sized company?

As with a small company, a medium-sized company is determined by its turnover, balance sheet total (meaning the total of the assets) and average number of employees. 

A medium-sized company can prepare accounts according to special provisions applicable to medium-sized companies. It can also choose to submit reduced information to Companies House.

Public companies and certain financial services companies cannot qualify as medium-sized companies.

Similarly, companies which are part of a group which has members who are public companies or financial services companies cannot qualify as medium-sized for accounting purposes. 

What are the conditions to qualify as a medium-sized company?

To be a medium-sized company, you must meet at least two of the following conditions:

• annual turnover must be no more than £25.9 million;
• the balance sheet total must be no more than £12.9 million;
• the average number of employees must be no more than 250

Are any companies excluded from being treated as medium-sized?

Yes. A company cannot be treated as a medium-sized company if it is, or was at any time during the financial year, one of the following:

• a public company;
• a company that has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity or that carries on an insurance market activity; or
• a member of an ineligible group.

Can a company qualify as a medium-sized company every year?

Generally, a company qualifies as ‘medium-sized’ in its first accounting period if it fulfils the conditions in that period. In any subsequent period a company must fulfil the conditions in that period and the period before.

What are the exemptions available for medium-sized companies?

Medium-sized companies may omit certain information from the business review in their directors' report (that is, analysis using key performance indicators so far as they relate to non-financial information). Also a medium-sized company which is part of an ineligible group can still take advantage of the exemption from disclosing non-financial key performance indicators in the business review.

Medium-sized companies preparing Companies Act accounts may omit disclosure with respect to compliance with accounting standards and related party transactions from the accounts they send to their members.

Medium-sized companies preparing Companies Act accounts may choose to file a slightly reduced version of the profit and loss account

What does a medium-sized company have to deliver to Companies House? 

Abbreviated accounts of a medium-sized company must include:

• the abbreviated profit and loss account (this must be full if preparing IAS accounts);
• the full balance sheet;
• a special auditor's report;
• the directors' report; and
• notes to the accounts.

The special auditor's report should state that in the auditor's opinion the company is entitled to deliver abbreviated accounts in accordance with section 445(3) of the Companies Act 2006 .

The balance sheet (and if appropriate, the directors' report) must contain a statement that the accounts have been prepared in accordance with the special provisions of  section 445(3) Companies Act 2006 in regard to medium-sized companies.

Are there special rules for medium-sized groups? 

No. A medium-sized parent company must prepare group accounts and submit them to Companies House.

What is a dormant company?

A company is dormant if it has had no 'significant accounting transactions' during the accounting period. A significant accounting transaction is one which the company should enter in its accounting records.

When determining whether a company is dormant you can disregard the following transactions:

• payment for shares taken by subscribers to the memorandum of association;
• fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and
• payment of a civil penalty for late filing of accounts.

What are the conditions that a dormant company must meet to be exempt from audit? 

A dormant company is exempt from having an audit for that financial year if:

• it has been dormant since its formation; or
• it has been dormant since the end of the previous financial year and it meets the following conditions:
• it is entitled to prepare individual accounts in accordance with the small companies regime;
• it is not required to prepare group accounts; and
• it qualifies as a 'small company' in relation to that year (see Chapter 6), or would have qualified as small but for the fact that it is a public company or is a member of an ineligible group.

What exemption is available?

Dormant companies can claim exemption from audit and need only prepare and deliver to Companies House an abbreviated balance sheet and notes. You do not have to include a profit and loss account and directors' report in dormant company accounts filed at Companies House, but you must provide a directors' report to members.

A company may not take advantage of the dormant company audit exemption if at any time in the financial year in question it:

• is a public company unless the company is dormant;
• is an authorised insurance company, a banking company, an e-money issuer, a MiFID (ie Markets in Financial Instruments Directive) investment firm or a UCITS (i.e.Undertakings for Collective Investment in Transferable Securities) management company; or
• carries on insurance market activity;

Nor can a company take advantage of the dormant company audit exemption if an audit is required by a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares; or - in the case of a company limited by guarantee - 10% of its members in number.

A company is not entitled to the dormant company audit exemption unless its balance sheet contains the statements referred to it.

What information must dormant company accounts contain?

Dormant company accounts submitted to Companies House need not include a profit and loss account or directors' report.

Unaudited dormant accounts are much simpler than those of a trading company but must contain:

• a balance sheet containing statements above the director's signature to the effect that the company was dormant throughout the accounting period – see question 5.
• any previous year's figures for comparison - even though there are no items of income or expenditure for the current year; and
• certain notes to the balance sheet.

What statements do I need to make on the balance sheet?

If you submit your accounts to Companies House on paper, you must check that you have the following statements above the director's signature: 

Audit Exemption Statement

For the year ending ………………………. (dd/mm/yyyy) the company was entitled to exemption from audit under section 480 of the Companies Act 2006 relating to dormant companies.

Directors’ responsibilities:

• The members have not required the company to obtain an audit of its accounts for the year in question in accordance with section 476; and
• The directors acknowledge their responsibilities for complying with the requirements of the Act with respect to accounting records and the preparation of accounts.

A private company that qualifies as small should also include the following statement on the balance sheet:

These accounts have been prepared in accordance with the provisions applicable to companies subject to the small companies’ regime.

How long do I have to submit dormant accounts to Companies House? 

You have the same time allowed for filing as for other accounts, and the same penalties for late filing apply.

Partnership accounts  

What accounts must the partnership prepare? 

The partnership must produce audited accounts as if it were a company.  The accounts must conform to the requirements of the Companies Act 2006 and related regulations.

For what period must I prepare the partnership accounts? 

The accounts may cover any period up to 18 months which may be specified in the partnership agreement. If the partnership agreement does not specify a period, you must draw up the accounts for each 12 month period ending on 31 March in each year.

When must I prepare the accounts? 

You must prepare the partnership accounts within a period of 9 months after the end of the financial year.

Are there any penalties for non-compliance?

Yes. Every partner in a qualifying partnership or every director of a company that is a partner may be prosecuted and fined up to £5,000.

LLP Partnership’s Accounting Period and Tax Year 

Accounting period and its corresponding partnership tax return and tax return for partners could be different as the tax year ends on 5th April. It is advisable for the partnerships to end their accounting period on 5th April of each year so that both accounting period and tax year could end at the same time.

For Example: If your accounting period is starting on 1s  June 2009 and it is ending on 31th May 2010 then the first tax year would be from 1st June 2009 to the 5th April 2010. This means the partnership tax return and personal tax return of partners have to be submitted for 2009/10 tax year on or after 6th April 2010.

Deadlines for partnership tax return and personal tax return of partners
If you are submitting paper based return then the deadline is 31st October of each year. For Example 2009/10 paper return must be submitted by 31st October 2010.

If you wish to submit online then deadline is 31st January of the following year. For Example 2009/10 online return must be submitted by 31st January 2011.

If returns are not submitted on time to HMRC then the penalty will be charged to you.