What are statutory accounts?

Updated: Mar 12, 2019

If you’re running your own business, you’ll already know that you need to wear a lot of different hats. From product development to marketing to IT, you’re probably involved in everything. But one area which often trips up business owners is accounting. Although you could do your own accounts, the stakes are high if you get it wrong, so it makes sense to call in the professionals, when it comes to year end.

There are 1.9 million private limited companies trading in the UK and they must follow certain reporting rules to stay on the right side of the law and HMRC. One of these is the requirement to file statutory accounts at the end of every financial year. But what exactly are statutory accounts and why do you need them?

Statutory accounts (also called financial accounts, annual accounts or company accounts) are a report of all the financial activity undertaken by your company over the last financial year. Your year will usually begin on the last day of the month in which you set up your company – for example, if your company was incorporated on 6 April, your financial year would run from 30 April every year – this is called your accounting reference date.

HMRC uses your statutory accounts along with your company tax return to calculate how much corporation tax you should pay, and some of the information is kept as a public record by Companies House, the registry for all UK limited companies.

Who needs to file statutory accounts?

All private limited companies in the UK are required by law to produce statutory accounts. Although, the rules are slightly different for dormant companies, and small and micro businesses, as they can file simpler, abridged versions which consist of just the balance sheet and notes. However, small companies still need to send their full accounts to HMRC as part of their company tax return.

A small company is defined as one which meets two of these three criteria:

  • annual turnover of £10.2m or less,

  • £5.1m or less on the balance sheet,

  • employing a maximum of 50 people.

A micro-entity will have at least two of the following:

  • turnover of £632,000 or less,

  • £316,000 or less on the balance sheet,

  • employing up to 10 people.

For a business to be considered dormant, it will not have conducted any significant activity during the reporting period.

What do statutory accounts need to include?

If your limited company is not a small or micro-entity, you will usually need to file full statutory accounts.

These will include:

  • a balance sheet, which tallies up how much your company owes or is owed from suppliers, creditors and clients (a director will need to sign this);

  • a profit and loss statement, showing your net profit after sales and running costs;

  • notes, which give context to the accounts, for example by explaining borrowing or a one-off fine, and

  • a director’s report, which is commentary on the company’s financial health over the reporting period, explaining any events which affected performance, and giving an outlook for growth in the coming financial year.

If your company is large, you may also have to include an auditor’s report which will state that, in the auditor’s opinion, the information given in the accounts is correct.

Statutory accounts need to be drawn up according to certain accounting standards, so you will need a qualified professional accountant who works to these. Find and compare small business accountants with PROfiltr here.

Who needs copies?

As well as HMRC, you need to send copies of your statutory accounts to Companies House, your shareholders if you have them, and anyone who attends your company’s general meetings.

What happens if I don’t file?

The deadline for filing your statutory accounts will usually be 21 months after you first register with Companies House, if your business is newly incorporated. From then on you will need to file nine months after the end of your company’s financial year. As a company director, the legal responsibility for filing your annual accounts ultimately rests with you, even if you outsource them to a professional like an accountant.

HMRC takes a dim view of late filers so it’s important to make sure you meet your deadline. You can be fined £150 if your accounts are a month late, and up to as much as £1,500 if they are more than six months late. You can be struck off the Companies House company register if you fail to file your accounts, meaning your company will no longer exist, and you could even be prosecuted.

Your accountant should be able to keep you on track so you never miss a reporting deadline. Find the right small business accountant for you by requesting free quotes.