Can you tell your annual accounts from your annual confirmation statement? They sound similar but in fact they’re quite different. What’s required, what are the deadlines and do they apply to sole traders as well?
The annual accounts
Both sole traders and limited companies prepare annual accounts and file their accounts with HMRC as part of their tax returns, the sole trader for self assessment and the limited company for corporation tax.
One major difference is that limited company accounts must also be filed with Companies House, which is something that sole traders aren’t required to do.
The company accounts are visible to the public whereas sole trader accounts can be kept private. However smaller companies can restrict what is publicly visible to some extent. They are allowed to file a “filleted” version of the accounts that doesn’t include the P&L and also an “abridged” version of the balance sheet.
The second difference is that sole trader accounts don’t have to adhere to any specific rules and standards, however they are usually produced to standard accounting conventions so that they can be compared between businesses.
The requirements for a limited company accounts are much more stringent. They must be produced in line with the UK GAAP (Generally Accepted Accounting Principles) and FRS (Financial Reporting Standards). For accounts periods starting 1 Jan 16 this is now FRS102 for small companies or FRS105 for microentities.
The company annual accounts must be filed with Companies House within nine months of the year end. The year end date will vary between companies but will always be the last day of a month. If the year end is 31 January then the deadline for the accounts will be 31 October. If the accounts are not filed there is an initial fine of £150, which increases as time passes.
Corporation tax is different and a bit odd; it must be paid 9 month and one day after the year end, but the filing deadline is actually 12 months. There is an initial penalty of £100 for missing the 12 month filing deadline and again this will increase with time. Most companies keep things simple and submit the annual accounts and corporation tax return at the same time to meet the 9 month deadline.
For a sole trader the filing and payment deadline is the same for everyone on 31 Jan each year, so it’s closer to 10 months. Again there is a penalty of £100 for missing the filing deadline, increasing with time.
The annual confirmation statement
It’s the annual confirmation statement that causes confusion, firstly because there is no sole trader equivalent and secondly because until recently it was called the annual return.
On a regular basis we’ll receive a panicked phone call from one of our clients as a result of the Companies House annual confirmation statement reminder letter. It is quite a strongly worded missive threatening fines and warning that the company can be struck off if the two week deadline is not met.
The good new is that, unlike the accounts which can take many hours to produce, the annual confirmation statement can be completed quickly online. It may only take around 15 minutes if there have been no significant changes to the company. It confirms the details held by Companies House.
Previously, called the annual return, it changed name in July 2016 and also added a new requirement to register People of Significant Control (PSC). People of Significant Controls (PSC) for a company will include anyone with over 25% of the shares or voting rights, the right to remove or appoint the majority of directors or anyone with significant control influence in other ways e.g. financial.. The name, DOB, contact address and personal address are recorded (although personal address is not visible on the public record). For most small companies this will be one or more of the shareholders, who are usually also a director or a director’s immediate family member.
The annual confirmation statement falls due on the anniversary of the company formation, although you can change this date. Unlike the accounting year end, it’s not always going to be the last day of the month.
There is now only a two week window for filing (for the annual return it used to be four weeks). If the company was formed on 14 January then the annual confirmation statement can be filed from 14 Jan to 28 Jan.
Company directors can be fined up to £5,000 for failing to file the annual confirmation statement. Fines don’t seem to be so common for very small companies, but if the filing deadline is missed then Companies House will begin the process of striking off the company. It’s not an immediate action, but unless you act quite quickly you could well find the company struck off with the bank account inaccessible.
Some company directors do use non-filing of the annual return as way to close down an unwanted company without the hassle of filing a DS-01 form. It’s only advisable if the company has no remaining creditors, debtors, bank accounts or other assets.
Sole traders have no annual confirmation statement or any equivalent.
Where can I find my deadlines?
The easiest place to find your company deadlines is on the Companies House website. This will give you both your annual accounts and annual confirmation statement deadlines.
HMRC will normally send you a letter to remind you of your deadline for self assessment and for corporation tax. For corporation tax this should be around your company year end and for self assessment it’s usually early May. You can also view your tax deadlines via your Government Gateway online account.
Limited company annual accounts
Must comply to FRS standards
Filed with Companies House within 9 months of company year end
Corporation tax paid within 9 months and 1 day of company year end
Corporation tax return filed within 12 months of company year end.
Sole trader annual accounts
Does not have to comply to specific FRS standards
Filed as part of self assessment tax return by 31 Jan
Annual confirmation statement
Limited companies only
Includes People with Significant Control
Two week filing deadline