A Year End comes but once a year (obviously), and can be a daunting undertaking for first-time limited company directors. However it needn’t be the end of the world – take it one step at a time and you’ll do just fine.
What is a Year End, anyway?
A ‘Year End’ is accountancy slang for the documents a limited company must file with HMRC and Companies House at the end of every financial year. What you must file depends on your company, but a Year End will always include two documents.
Corporation Tax Return (CT600)
Filed with: HMRC
Contains: Broadly speaking, details of your company’s income minus any tax allowances and expenses. The remaining figure – your profits – will then be used to calculate how much Corporation Tax your company owes.
Filed with: Companies House
Contains: Details about your company finances which must be made public in accordance with the Companies Act 2006. This includes cash held in the company, assets, debtors and creditors.
What should I do to get ready?
Much like buying toilet roll, preparing for your Year End is not something you should leave until the last minute. Before you can prepare your CT600 and Abbreviated Accounts there a few bits of housekeeping you need to take care of.
Get your expenses in order
Every Pound you claim as a legitimate business expense is a Pound off your company profits, and less profit means less Corporation Tax to pay. Before your Year End make sure you’ve claimed for each and every expense you can. Not sure if you can claim something? HMRC’s rule is expenses must be “wholly and exclusively” for business use, so if you bought something for your business – no matter how bizarre – you can probably claim it as an expense.
Round up those overdue invoices
Your Year End should be as accurate as possible, so turn debt collector a few weeks beforehand and chase up any unpaid invoices you may have. Once you have the money in your company bank account you can record it properly, and reconcile your accounts in your accounting software, making sure they’re 100% accurate.
Collect all your paperwork
As we’re always saying, accounts don’t mean squat without records to back them up. Before filing your Year End make sure you have records for everything – this can mean getting statements of account from suppliers, bank and credit card statements from financial institutions, and records of any other income you receive.
What else do I need to think about?
If your company is VAT Registered (on either the Flat Rate or Standard scheme) you will most likely have a VAT Return due at the same time as your Year End. VAT Returns aren’t often thought of as part of a Year End, but they usually coincide with one. Make sure you don’t panic about your Year End and forget to file your VAT!
You should also think about your Annual Return. This is due 28 days after the beginning of your new company year, and is basically a summary of your company details. It includes company name and registration number, details of directors and shareholders, registered address and trading activity.
The run-up to your Year End is the perfect time to think about some financial and tax planning, to help minimise your tax bill in the immediate future, and also the long-term. This can include paying money into ISAs, bringing your spouse or partner into your business, or channeling some of your income into a pension.
Review your suppliers
It’s a great idea to review your service providers once a year anyway to make sure you’re getting value for money – why not do it at your Year End? That way you can ditch any overpriced or unneeded suppliers and start afresh in the new financial year!
What happens if I miss the deadline?
To encourage limited companies to file their CT600 and Abbreviated Accounts on time, HMRC and Companies House have penalty regimes for those who miss the deadline. These penalties increase with time, so if you’re continually tardy to the filing party you can expect it to cost you dearly!
CT600 late filing penalties
|If you miss your filing date||£100|
|If you still haven’t filed after 3 months||£100|
|If you file late three years in a row||All penalties increase to £500|
Abbreviated Accounts late filing penalties
|Up to a month late||£150|
|Up to 3 months late||£375|
|Up to 6 months late||£750|
|Over 6 months late||£1,500|