If you’ve been running your limited company for less than a year, your first company year end can appear to be complex and daunting, but it doesn’t have to be. In this article we’ll share what you need to know.
What we mean by your year end
Your company year end, or “accounting reference date” is the date up to which your accounts are prepared. While the tax year for individuals ends on the 5th of April, your company year ends at the end of the month in which you set up your limited company, unless you apply to change this date with Companies House.
Your first year-end accounts could cover more than one year – for example if you started trading on the 5th of March, your first year will run from the 5th of March to the 31st of March the following year.
What happens at your company year end?
Corporation Tax Return to be filed on line with HMRC
Payment of any Corporation Tax due to HMRC
Statutory Accounts to be filed online at Companies House
What are the deadlines?
Your accounts will usually be due at Companies House 9 months after your year end, but the first time they’re due slightly earlier, 9 months after you incorporated your company.
Your Corporation Tax Return is due within 12 months of your year end, but your Corporation Tax payment is due before this, 9 months and 1 day after your year end.
Why we don’t advise you to wait
Experience tells us that these tasks are generally much more straightforward if completed in plenty of time. At your year end all the necessary information is available and you have nine months before the first deadlines arrive – this is the best moment to act, when your accountant has plenty of time to address any questions you have and there’s no added pressure from an approaching deadline. This also gives you as much time as possible to prepare for paying the tax.
If you have a director’s loan account
If a director’s loan is repaid within 9 months of your year end, there is usually no tax to pay. Overdue payments are subject to S455 tax, charged at 33.75% of the outstanding loan balance (2022/23). This is another good reason to act straight away, because it gives you as much time as possible to resolve any outstanding balance before your accounts have to be filed.
Late filing penalties
There are some automatic financial penalties for late filing. :
Corporation Tax Return to HMRC
1 Day late | £100 |
3 Months late | Another £100 |
Late 3 years in a row | Both of the above increase to £500 |
Statutory Accounts to Companies House
Up to one month late | £150 |
Between 1 and 3 months late | £375 |
Between 3 and 6 months late | £750 |
More than 6 months late | £1,500 |
Late 2 years in a row | Each of the above doubles |
Ensuring the deadlines are not missed
The best way to ensure these deadlines are met and you don’t incur any charges is to:
Ensure your records are accurate and up to date. This is best practice anyway, as up to date records will allow your accountant to provide more insightful advice and give you better information on which to base your decisions.
Respond to your accountant in a timely fashion. If your accountant asks you for information, they will not be able to proceed until you’ve responded. Getting back to us right away is the best way to avoid unnecessary delays.
In return, we’ll ensure you accounts are prepared and reviewed within 6 weeks of receiving your information.
Last minute expenses
It’s important to update your out of pocket expenses before the year end, as this will help to reduce your Corporation Tax liability. Here are some common things you might want to include:
Pension contributions
Your company can claim the cost of contributions it makes to your pension, reducing the effective cost by the rate of Corporation Tax which is currently 19% (2022/23).
Trivial benefits
Your company can claim the cost of trivial benefits to employees, up to £300 per year. To qualify the following criteria must be met:
· it cost you £50 or less to provide
· it isn’t cash or a cash voucher
· it isn’t a reward for their work or performance
· it isn’t in the terms of their contract
Staff entertainment
Take advantage of the annual event allowance of £150 per employee, and £150 for their plus one.
Staff training
You can claim the cost of work-related training through your company.
If you have questions or if we can help in any way, please call our expert team on 01296 468483 or email info@orangegenie.com.