A tax accounting period for Corporation Tax purposes cannot exceed a 12 month period. If company accounts cover less than 12 months then the accounting period will normally end on the same day, and thus will be shorter than 12 months. This can happen if the company stops trading or shortens its company’s year-end: also known as its accounting reference date.
There is an interesting anomaly if the company has more than one trade. If this is the case, the company may make up accounts for one or more of them with different accounting dates, instead of one account for all its activities. In a case like this, the company should agree the accounting date it will use. Normally a date which achieves an unbroken succession of 12-month periods is preferable.
Companies may also have to contend with having two different company accounting periods. This is because there are different rules for Companies House filings and for HMRC to whom any Corporation Tax due is ultimately paid.
Under certain circumstances, companies (including non-resident companies trading from a branch or agency in the UK and local authorities) can have a duty to deduct tax in connection with certain payments. In effect the company accounts for all or part of the tax liability on behalf of the recipient of the payment.
For example, from:
- payments of yearly interest
- annual payments
- patent royalties
- royalties etc to a person who lives abroad
- the proceeds of a sale of patent rights paid to a non-UK resident
- chargeable payments connected with exempt distributions
- directions for deduction from payments to non-UK residents.
Companies (and various other entities) making these deductions are obliged to account for the amounts deducted using form CT61. HMRC is happy for the entries on these forms to give aggregated figures of amounts paid or credited and the tax deducted for the return period. However, the payments should be split for pre and post 5 April interest to reflect any change in the tax rate.
A Close Company is broadly defined as a company that is controlled by:
- five or fewer participators or
- any number of participators who are also directors or
- where more than half the assets of which would be distributed to five or fewer participators, or to participators who are directors, in the event of the winding up of the company.
A participator is broadly somebody who has a share or interest in the capital or income of a company such as having share capital, voting rights or a right to capital on winding up of the company. This can be a shareholder, director or a loan creditor.
Most small private companies will meet the definition of a Close Company and there are some specific tax rules that apply to these companies. This includes, for example, where a Close Company pays for personal expenses of a director or makes a loan to one of its participators.
There are special rules in place which limit your options to change your company’s year-end date. A company’s year-end date is also known as its ‘accounting reference date’ and is historically set by reference to the date the company was incorporated. Under certain circumstances it is possible to make a change to the year-end.
As a general rule, you can only change the year end for the current financial year or the one immediately before it. Making a change to a year-end date will also change the deadline for filing accounts (except during a new company’s first financial year).
There is no limit to the amount of times you can shorten a year-end date, but you can only extend the period to a maximum of 18 months once in every five years. The financial year can be extended more often under limited circumstances. For example, if the company has been placed in administration.
A request for a change to an accounting reference date can be made online using the Companies House online service or by using a postal version of the Change your company accounting reference date (AA01) form. No change can be made to a period for which accounts are overdue.
There is no overriding reason for using one date over another, but there are a number of factors to consider. The most common year-end dates are 31 December (to coincide with the end of the calendar year) or 31 March (to coincide with the end of the tax year).
An overseas company must register with Companies House if they want to set up a place of business or branch in the UK. Generally, this would be if the overseas company had a physical presence in the UK through which it carries on business.
If an overseas company does not have a physical presence in the UK, they are not usually required to register with Companies House. For example, an independent agent who conducts business on behalf of an overseas company is not considered to have a physical presence in the UK, neither is an occasional location such as a hotel where a director of an overseas company may conduct business during periodic visits to the UK.
If an overseas company is required to register, then they must submit a completed OS IN01form and pay the standard registration fee of £20 to Companies House. If the company is registering its first UK establishment, it must also send Companies House a certified copy of the company’s constitutional documents and a copy of the company’s latest set of accounts (with a certified translation in English if prepared in another language).
The overseas company can be registered using its corporate name (its name under the law of the country of incorporation), or an alternative name under which it proposes to carry on business in the UK.
There are a limited range of circumstances when a company can request to be removed from the register (known as being struck off). For example, a voluntary strike off can be requested by a dormant or non-trading company.
You can object to a limited company’s application to be struck off the companies register if you’re a shareholder or other interested party, such as a creditor, and have a reason to stop the application, for example:
- you have not been told about the company’s decision
- you think the declarations on the company’s application are false
- the directors have broken the law, for example tax fraud
- you want to take legal action against the company
When a company has applied to be struck off, it is required to post a notice in the Gazette. You can only raise an objection (to Companies House) after this notice has been published.
You will need to provide evidence to support your objection, for example invoices showing the company is still trading or owes a debt.
Companies House must receive your objection at least 2 weeks before the notice expiry date (2 months after the date of publication). Companies House will let you know if your objection is successful and will usually set a time limit during which the company cannot be struck off.
Companies House has issued a press release to remind companies to keep on top of their filing responsibilities. The end of this month, 30 September 2019, marks a common deadline for many companies who will need to file their company accounts with a 31 December 2018 year-end date. Last year, a total of 25,049 companies failed to meet the 30 September 2018, filing deadline.
In fact, we are told that another 643 companies narrowly avoided a penalty. They actually filed their accounts in the final hour before the deadline. In total, 223,640 late filing penalties were handed out in 2018.
Companies House also published some of the bizarre excuses it has received for late filings including:
- I found my wife in the bath with my accountant,
- pirates stole my accounts,
- a volcano erupted, and
- goats ate my accounts and prevented me from filing!
The late filing penalties are designed to encourage companies to file their accounts and reports on time. The penalties for late submission by a private limited company are as follows:
How late are the accounts delivered
Not more than one month
More than one month but not more than three months
More than three months but not more than six months
More than six months
The penalty is automatically issued if your accounts are filed late and the penalties are doubled if your accounts are late 2 years in a row.
Failure to file confirmation statements or accounts is a criminal offence which could see the directors personally fined in the criminal courts. Late penalties which are unpaid, will be referred to collection agents and could result in a County Court judgement or a Sheriff Court decree against your company.
It is possible to appeal against a penalty, but there are strict circumstances for doing so including that you must be able to prove that the circumstances were outside of your control.
There is a significant amount of information that can be obtained from Companies House. Companies House is responsible for incorporating and dissolving limited companies, examining and storing company information and making company information available to the public.
Much of the company information available can be accessed free of charge. This is in line with the Government’s commitment to free data and means that all publicly available digital data held on the UK register of companies is accessible in this way. These records provide access to over 170 million digital records on companies and directors.
- company information, for example registered address and date of incorporation
- current and resigned officers
- document images
- mortgage charge data
- previous company names
- insolvency information
There is also a service called WebCHeck. This allows you to view a company's filing history and purchase copies of document images as well as a selection of company reports. You can also elect to monitor a company and receive email alerts of any new documents filed at Companies House. This can be a useful thing to sign up for as this would help you ensure there are no unexpected filings made for your own company.
There are a number of reasons why a limited company may no longer be required and can be shut down. This may be because the limited company structure no longer suits a client's needs, the business is no longer active, or the company is insolvent. You will usually need the agreement of all the company’s directors and shareholders to close down the company.
The method for closing down a limited company depends on whether it is solvent or insolvent. If the company is solvent, you can apply to get the company struck off the Register of Companies or start a members’ voluntary liquidation. The former method is usually the cheapest. You should also make sure that no business assets are left as any funds in business bank accounts could revert to the Crown.
Where a company is insolvent, the creditors’ voluntary liquidation process must be used. There are also special rules where the company has no director, for example if the sole director has passed away.
A company can also elect to become dormant. A company can stay dormant indefinitely, however there are costs associated with this option. This might be an option if, for example, a company is restructuring its operations or wants to retain a company name, brand or trademark. The costs of restarting a dormant company are typically less than forming a new company.
As well as filing accounts with Companies House, there is a further requirement to check that the information Companies House holds about your company is correct every year. This is facilitated by the filing of an annual company confirmation statement. The confirmation statement was introduced in June 2016 and replaced the annual return form.
A confirmation statement must usually be filed at Companies House once every 12 months and rather than resubmitting data every year, the confirmation statement only needs to be updated if you have changes to report. If there are no changes then you just need to confirm the information is correct and submit the statement.
The following details need to be checked:
- the details of your registered office, directors, secretary and the address where you keep your records
- your statement of capital and shareholder information if your company has shares
- your SIC code (the number that identifies what your company does)
- your register of 'people with significant control' (PSC)
Any necessary updates to the statement of capital, shareholder information and SIC codes can be made when submitting the confirmation statement. However, the confirmation statement cannot be used to report changes to your company’s officers, the registered office address, the address where you keep your records and people with significant control. These changes must be filed separately with Companies House and this should be done at the same time or prior to submitting the confirmation statement. The confirmation statement can be filed online (at a cost of £13) or by post (at a cost of £40).