Company accounts and filings

All private limited and public companies must file their accounts at Companies House in accordance with the Companies Act 2006. Many companies choose an accounting period ending on 31 March, so the deadline for filing their accounts is very soon, on 31 December.

In this article, we give a brief overview of the requirements for company accounts and filing them at Companies House.

What are accounting records?

Accounting records are the records that every company is required to keep as evidence of its financial activity. Every company must keep accounting records that contain:

• entries showing all money received and spent by the company; and
• records of assets and liabilities of the company.

Additionally, if your company deals in goods, the records must contain details of:

• stocks held by the company at the end of each financial year; and
• all goods sold and purchased, other than by ordinary retail trade.

As a director, you should keep copies of the company’s accounting records at the registered address of the company or such other place as you think fit. Private companies should keep accounting records for three years, whereas public companies must keep them for six years.

What should your company’s accounts contain?

Generally, accounts must include:

• a profit and loss account (or income and expenditure);
• a balance sheet;
• notes to the accounts; and
• group accounts (if appropriate).

Moreover, accounts may also include:

• a directors’ report; and
• a strategic report if a large company;
• a directors' remuneration report; and
• an auditors’ report (unless the company is exempt from audit).

Where do you need to send your company’s accounts?

Once approved by the company’s directors, they must send copies of the accounts to:

• all members of the company;
• all holders of the company’s debentures;
• all those who are entitled to receive notice of general meetings;
• all nominated persons (if any) under section 145 of the Companies Act 2006; and
• Companies House.

When should you file your company’s accounts with Companies House?

Where the accounts are not the first accounts of the company, the time allocated for delivering accounts to Companies House is:

• nine months from the accounting reference date for a private company; and
• six months from the accounting reference date for a public company.

For example, a private company with an accounting reference date of 30 June has until midnight on 31 March of the following year to deliver its accounts.

For all new companies, the first accounting reference date is set as the last day in the month in which its first anniversary falls. The first accounts usually cover more than 12 months because they:

• start on the day your company was incorporated; and
• end on the ‘accounting reference date’ that Companies House sets for the end of your company’s financial year.

For example, if your company was set up on 11 May, the accounting reference date will be 31 May the following year. The Company’s first accounts would cover 12 months and 3 weeks.

Even if the date for filing your company's accounts falls on a Sunday or bank holiday, you must still file them at Companies House.

It is possible to change your company’s accounting reference date. To do this you must notify Companies House of a change of accounting reference date using Companies House form AA01.

How should you file accounts?

Companies House has made the process of filing quicker by allowing online submission of accounts. You can go onto the Companies House WebFiling service and do it from home. Alternatively, paper copies of company accounts can be sent to Companies House.

What happens if you don’t file accounts properly?

In 2018, 223,640 penalties were handed out for late filing of company accounts, with London being the worst area in the country for late accounts.

For private companies, missing the deadline incurs a penalty of £150. This fine can increase to £1,500 for accounts that are more than six months late. The consequences are more severe for public companies; fines start at £750 for being less than a month late, which is doubled every three months until it reaches £7,500 for being more than six months late.  The penalty can then be doubled if your company’s accounts are late two years in a row.

In addition, if accounts are not submitted to Companies House, the registrar will assume that the company is no longer in operation and start the process that leads to a company being struck off the register completely and the company’s assets becoming the property of the Crown.

Failure to deliver documents is also criminal offence, for which all the directors of a company may be liable. Upon conviction, a director could have a criminal record and be fined an unlimited amount.

What do you need to be doing now?

Ensure that you are filing your company’s accounts on time. You can schedule email reminders through the Government website. It is also important that accounts are filed correctly, so that you are not caught out by rejection, which may further delay the filing. Common reasons for rejection include:

• incorrect or missing statements;
• duplicate or incorrect reference dates; and
• missing signatory names or signatures.

More caution needs to be used if submitting accounts in paper form, rather than electronically. The accounts should typically be sent by guaranteed next day delivery as postal delays are not accepted as a valid reason for late filing.

In the past, directors have tried all kinds of excuses for late filing:

• “pirates stole my accounts”;
• “it was Valentine’s Day”;
• “a volcano erupted”; and
• “my company was more successful than I thought it would be, so I was too busy to file.”

Although amusing, these excuses were all – unsurprisingly – rejected, and each company received late filing penalties.

If there is something which prevents you from filing, which is beyond your control, you may apply for additional time online or by posting an application to Companies House with supporting evidence and reasoning to explain why. This needs to have been received by Companies House before the expected filing deadline.  The circumstances in which Companies House will grant an extension are, however, fairly limited.

If you or your fellow directors are unsure about your company’s filings, please get in touch with our Corporate team for further assistance.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.