What are Statutory Accounts?

Statutory accounts are just one of the legally mandatory compliance requirements that private limited companies must fulfil. Experienced directors are likely to be well aware of the many filing and reporting responsibilities they have, but if this is the first time you are running your business as a limited company, then understanding how to ensure your statutory accounts are completed on time will be crucial. This article will give you a practical summary of what you need to know in order to complete your statutory accounts.

What are statutory accounts?

Statutory accounts are known by many names including annual accounts, year end accounts, and company accounts. They are a set of formal and standardised financial reports which provide an overview of the business’ financial performance over a specific period (typically 12 months) and need to be submitted to both Companies House and HMRC each year.

What is the purpose of filing statutory accounts?

Filing your statutory accounts serves many important functions. Firstly, statutory accounts are a legal requirement to ensure transparency and accountability of the company towards their shareholders, creditors, and the public. Statutory accounts are publicly available through the Companies House register and therefore encourages companies to carry out their operations diligently.

Secondly, they are necessary when it comes to assessing business performance. Annual accounts offer valuable insight into the company’s financial activity, financial health, profitability, and operational efficiency. Directors will be able to use these reports to make informed decisions on how to best manage the business, how to increase productivity, and how to improve overall performance. Moreover, because a company’s accounts may indicate the business’ stability, potential investors and lenders may also review these reports before making a decision on whether they will want to invest or lend funds.

Finally, you need to complete your statutory accounts in order to calculate the amount of corporation tax your company is due to pay. As a company must submit a company tax return to HMRC each year, a key part to doing this is providing the financial reports that make up your annual accounts.

Who has to complete statutory accounts?

In the UK, it is the directors of limited companies who must ensure the submission of their statutory accounts for the company. Whilst many will seek the expertise from a corporation tax accountant to help complete accounts on their behalf, directors remain legally responsible for the accuracy and timeliness of the accounts. This means that, even if the accountant misses the deadline, it is the company directors who will receive the penalty and the accountability of the accountant is not taken into consideration.

Only limited companies need to complete statutory accounts. If you operate your business through a different business structure such as a sole trader or partnership, then you are not required to do so.

If you are going to prepare statutory accounts yourself, you may find our guidance on how to prepare full statutory accounts useful.

Who should receive statutory accounts?

It has been made clear by now that statutory accounts must be submitted to Companies House and HMRC, but regulations also stipulate that directors must issue copies of the accounts to all shareholders of the company, as well as any person who is eligible to attend the company’s general meetings. Although this formality is more relevant to larger companies, it is worth being aware of this as a smaller company should the time come where you expand and grow the business.

What type of company accounts do I need to file?

There are 5 different types of accounts for UK limited companies:

• Small company accounts
• Micro-entity accounts
• Medium-sized company accounts
• Large company accounts
• Dormant company accounts

As you can see, what type of company account you need to file is dependent on the size of your limited company, or if your company is currently dormant. The smaller the company you are, the simpler your company accounts can be.

Small, micro-entity, and dormant companies are permitted to file ‘abridged’ accounts which are simpler versions compared to full statutory accounts. In order to do this however, shareholders must agree to send abridged accounts rather than full accounts.  Another option is that they may be able to provide ‘filleted’ accounts. This is where full statutory accounts are prepared but key information is removed so that it is not disclosed to the public.

Medium-sized and large companies on the other hand will have no such options and will need to provide full statutory accounts. These are also likely required to be audited (eligible medium-sized companies may be exempt and will need to provide an audit exemption statement instead). The small difference between medium-sized and large companies is that medium-sized companies may be able to omit certain details from the director’s report where they do not relate to financial information.

Can I file small company accounts?

You’ll be able to file simpler annual accounts for a small company if you can satisfy at least 2 of the below conditions:

• Your company’s annual turnover is less than £10.2 million
• Your balance sheet is no more than £5.1 million
• You have no more than 50 employees

What to do for small company accounts:

Directors will generally need to prepare a profit and loss report, a balance sheet, include any notes to the accounts, a director’s report, and an auditor’s report (unless exempt) for the company’s shareholders. You can then choose whether or not you wish to include the profit and loss report, director’s report, and auditor’s report (if available) to Companies House as these are not mandatory for filing.

An alternative is to file abridged accounts, but you can only do so where company shareholders agree to do so. You must file the same version of accounts with Companies House as what you provide to your shareholders. Abridged accounts are a simplified version of the balance sheet which does not disclose certain details including the business’ fixed assets, creditors, debtors, as well as your corporation tax figure. You can still choose to send a profit and loss report, director’s report, and auditors report if you wish where you have filed abridged accounts with Companies House (but most companies will opt not to do so).

How do I know if I qualify as a micro-entity for my company accounts?

Small companies are further divided into a subgroup of even smaller companies known as micro-entity companies. You’ll qualify as a micro-entity company for your year-end accounts if you meet at least 2 of the following criteria:

• Your company’s annual turnover is less than £623,000
• Your balance sheet is no more than £316,000
• You have no more than 10 employees

What to do for micro-entity company accounts:

Where you qualify as a micro-entity you need only prepare a balance sheet, profit and loss account  with the statutory minimum requirement, and director’s report for your shareholders. The balance sheet which has been provided to the shareholders must be the same as what you file with Companies House, but you can choose not to file the profit and loss accounts and director’s report.

What counts as a medium-sized company for year-end accounts?

Your business will count as a medium-sized company if you fall within at least 2 of following thresholds:

• You have an annual turnover that is no more than £36 million
• Your balance sheet is less than £18 million
• You hire no more than 250 employees

What to do for medium-sized company accounts:

For medium-sized companies, your statutory accounts must include a profit and loss account, a balance sheet, cash flow statement, notes to the accounts, a director’s report, and an auditor’s report (unless exempt). You must prepare these according to accounting standards which comply with the Companies Act 2006, These are either UK GAAP (generally accepted accounting principles) or International Accounting Standards (IFRS). Every component of the company accounts must be delivered to Companies House unlike for small or micro-entity companies.

What needs to be included in a large company’s accounts?

Large companies are those which meet at least two of the following:

• An annual turnover of over £36 million
• A balance sheet of £18 million or more
• Employ 250 employees or more

What to do for large company accounts:

Similar to a medium-sized company, you will have to put together full statutory accounts for both shareholders and Companies House. These include the profit and loss account, balance sheet, cash flow statement, notes to the accounts, a director’s report, and an auditor’s report. The director’s name and signature are essential on the balance sheet and director’s report. If you are a private limited company then you will have the choice of using either accepted accounting standards (GAAP or IFRS) to prepare your accounts, but if your company is listed publicly then you must use the IFRS format.

Do dormant companies still need to file year end accounts?

For the purpose of filing your year end accounts with Companies House, you will be considered a dormant company where you have no significant transactions during your financial year. However, it’s important to be aware that the definition of dormant is different for HMRC. Should you satisfy the conditions as dormant for HMRC, you may not have to submit a company tax return, but this does not mean you are not required to file your annual accounts.

What to do for dormant company accounts:

Every limited company must complete their statutory accounts obligation each year, even where they are a dormant company. Do not forget that even dormant companies must file their confirmation statement too each year with Companies House which is a separate statutory obligation.

When is the deadline for filing 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 deadline:

• 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 it 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 are the penalties for missing the company accounts deadline?

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.

What is the difference between statutory accounts and management accounts?

A key indication of the difference between statutory accounts and management accounts lies in their names. Statutory accounts are a legal obligation and mandatory for all limited companies, whereas management accounts are optional and are intended to support internal reporting, review, and decision-making for those managing a limited company, rather than for legislative compliance.

The management account report can be made up of the same set of financial reports that are included in statutory accounts, but one important difference is that they can contain as many other KPIs as relevant and needed. Nor does it need to follow any formal financial reporting standards or adhere to a set formatting structure. For these reasons, management accounts are often much more detailed and will show a more accurate picture of the company’s financial position than annual accounts which will only present a snapshot.

Key differences between management accounts and statutory accounts also include the deadline. For statutory deadlines, these must be completed within 9 months after the end of each financial year. Whereas for management accounts, these can be produced as many times as needed in a year with no formal deadlines (although periodic review such as quarterly is recommended).

Get help with your statutory accounts

If you’re looking for a chartered accountant to help you to prepare and file your accounts, then look no further than our accounting practice in either Oxford or Henley. We have a team of experts in both accounts and tax, with experience of producing statutory accounts, dormant accounts, and statutory audit accounts. To find out more about our statutory accounts service, get in touch using the online form.