When running a business, companies want to focus on what makes their business great. When it comes to statutory compliance, things can become overwhelming, uninspiring or worse yet, boring. However, such matters cannot be ignored.
UK private companies limited by shares ('company') are subject to a wide range of statutory compliance obligations in accordance with, amongst others, the Companies, Corporation Tax and VAT Acts and related regulations. Many additional obligations exist, however this blog post looks at Companies House and corporation tax annual compliance obligations.
Every company must prepare and file a confirmation statement and set of financial statements with Companies House on an annual basis whilst filing a corporation tax return annually to HMRC.
A confirmation statement is an endorsement that the information held by Companies House on the company is up to date. Companies must file a confirmation statement with Companies House at least once every 12 months and if the Company has undertaken certain changes, the Company’s new confirmation statement must state the relevant changes accordingly.
The information held by Companies House on the company will be determined both by the information stated on the incorporation application and any changes to the company filed with Companies House, such as change of directors, since incorporation.
When a company is incorporated, it is allotted a Confirmation Statement 'due date' which will be the first anniversary of its incorporation. The company’s first confirmation statement must be filed no later than 14 days after its due date. For example, a company incorporated on 1 July 2018 will prepare its first Confirmation Statement up to 1 July 2019 and file same by 15 July 2019.
Failure or delay in filing a confirmation statement will render a company and its officers eligible for prosecution and penalties. In addition to this, the Company will be considered no longer in good standing whilst the Registrar may remove the company from the register for non-compliance.
Every company must prepare and file annual financial statements that report on the performance and activities of the company during the year. The initial year end (Accounting Reference Date or 'ARD') is automatically set by Companies House upon incorporation and is typically the end of the month of incorporation in the following year. For example, a company formed on 1 July 2018 will have an ARD of 31 July 2019.
With the exception of the first set of accounts and other minor exceptions, financial statements must be filed with Companies House within 9 months of its ARD, known as its accounts filing deadline.
Companies can shorten a company’s ARD at any time or extend it once in every 5 years. However, an accounting period cannot exceed 18 months.
Financial statements may also require an audit depending on certain criteria including turnover, asset value and employee head count.
Failure to file the financial statements by the accounts filing deadline will result in financial penalties ranging from £150 to £3000. In addition, the company officers may be eligible for further prosecution.
UK resident companies are required to file a corporation tax return for each accounting period. For tax purposes, an accounting period may not exceed twelve months whilst the due date for filing a corporation tax return is within 12 months after the relevant ARD.
The UK operates a self assessment regime which places the onus on UK resident companies to assess their own profits on which corporation tax is due for payment to HMRC within nine months and one day from the end of the relevant accounting period.
For example, if the company has a year end of 31 December 2017, corporation tax should be paid no later than the 1 October 2018. Subject to certain exceptions, 'large' companies must pay their corporation tax in instalments.
Late and non-filing of corporation tax will lead to automatic penalties which increase in severity the longer the return is past its filing date.
Keeping on top of a company’s statutory obligations is important as non-compliance can lead to penalties, prosecutions and loss of earnings from reputational damage.
This blog post has reviewed only the routine Companies House and corporation tax annual compliance obligations companies’ encounter. However, depending on the level of activity and industry, companies may have other considerations including VAT Filings and payroll / PAYE, in addition to attending to event driven filings with Companies House, such as share allotments and officer changes.
Whilst some companies have an in house company secretary to manage such matters, many do not so therefore, whilst this blog post is general in nature, it is vital for companies to seek relevant advice when establishing and meeting their specific obligations.
This article was first published in the May 2018 edition of London Business Matters magazine