Preparation of Financial Statements or Annual Accounts in the United Kingdom
3E Accounting provides a quick read on the preparation of financial statements or annual accounts in the UK.
By virtue of the Companies Act 2006, the United Kingdom’s financial reporting is regulated according to company type and size. It includes the preparation of annual accounts, reports and filing of accounts. To avoid penalties and fines, it is essential to know about the preparation of financial statements or annual accounts in the UK.
All companies in the UK must see to their annual filing. Annual or statutory accounts need to be sent to Companies House, HMRC, as well as shareholders. Your financial year-end filing dates will also vary. The first accounting reference will be given by Companies House after incorporation, whereas HMRC will provide an accounting timeframe. However, they do not always run concurrently. It is best to consult with company formation specialists such as 3E Accounting to determine the financial year-end.
There are two types of accounting standards that are applicable and recognised as a financial reporting framework by the Companies Act 2006. The first is the International Financial Reporting Standard (IFRS). The second is the new UK Generally Accepted Accounting Practice (UK GAAP). Further, all financial statements or annual accounts must have the following as part of their submission:
- Director’s Report and Auditor’s Report (depending on the size and type of company)
- Profit and Loss Account
- Balance Sheet
- Account Notes
The overall form and content of financial statements and accounts are governed by Part 15 of the Companies Act 2006. They are further defined by secondary legislation which quantifies the type of companies, in particular:
- SI 2008/409 – for small companies and groups
- SI 2008/410 – for large and medium companies and groups
These Statutory Instruments (SI) define the rules and requirements with reference to form and content, including accounts and directors’ reports. As a general overview, the statutory instruments apply as follows:
All micro, small and dormant companies are allowed to send abridged accounts without audit statements to Companies House. Statutory accounts need to be given to HMRC and shareholders.
Medium and large companies must submit a director’s report, auditor’s report and a strategic report
Company size is generally determined by looking at a company’s annual turnover, the number of employees and balance sheet total. For example, a company that has a turnover of GBP10.2 million or less and 50 employees or less will be categorised as a small company. Medium-sized companies will show an annual turnover of GBP36 million and a balance sheet total of GBP18 million or less. Conversely, dormant companies are considered as having no ‘significant transactions’ during its financial year.
Failure to submit the appropriate filings within the allocated timeframe will result in penalties. These can range from GBP150 to GBP1500, while all filings that are late two years in a row will be doubled. While an appeal process is available, the burden of proof is high.
Overall, the preparation of financial statements or annual accounts in the UK is best left in the hands of experts. 3E Accountings offers global industry experience, and our team of skilled accountants are ready to steer you right. Contact 3E Accounting today and speak to our friendly professionals for an overview of customisable solutions that work best for your business.