All Limited Companies, regardless of size, have to prepare accounts and file tax returns. The exception is that if the company is dormant and has informed HMRC of being so in which case it does not need to file a Corporation Tax return but does still need to file dormant accounts at Companies House.
Deadline Reminders
What you have to file and when depends on the structure that you operate your business under. HMRC and Companies House, where applicable, may send reminders of the key dates. However, the best advice is to make a list of key dates for your business and set up recurring reminders in your calendar or diary system of choice so that you do not miss a deadline. For a limited company it is worthwhile signing up for the Companies House email reminders service which will tell you when your company’s accounts and confirmation statements are due.
Tax References
There are a plethora of taxes to be aware of although not all will apply to you or your business. If the tax does apply you will have a different tax reference number for each tax. Reference numbers can get a bit confusing as there are a lot of them! Whilst many of the references are termed “unique” unfortunately both HMRC and Companies House haven’t found a way yet of having one unique reference number for your business meaning that you will actually have many “unique” references relating to both you and your business. Unfortunately, none are interchangeable and you will need to know which reference number is for which type of tax. The best advice is to keep a list of them somewhere safe.
Changing Tax Rates
The rates of tax can also be complicated as these can change every year as the Chancellor of the Exchequer makes the Annual Budget or Autumn Statement announcements; although in recent times changes have been even more frequent!
When determining the current rate of the tax applicable the best place to refer to is the GOV.uk web site. Search for the name of the tax that you are interested in and include GOV.uk in the search term. There will be many other sites that will have information about tax, tax rates and allowances. These can of course be used. However, not every site is updated when things change. So, it is worth referencing back the rates to the correct ones on GOV.uk. The same applies to tax calculators of which there are many around. Again, do check that it is the calculator for the relevant tax year.
Summary of taxes, returns and due dates
Limited Company | |
Accounts | Prepared to the accounting reference date for the company. They are filed at Companies House 9 months after the end of the accounting reference date and also filed, along with the CT600 Corporation Tax Return, at HMRC. The filings at HMRC and Companies House are independent i.e. two separate submissions. |
Corporation Tax return known as the CT600 | Due for filing 12 months after the end of the accounting reference date |
Corporation Tax | Due 9 months and 1 day after the end of the accounting reference date |
Confirmation Statement | Due 14 days after the review period |
Self Assessment Tax Return | By 31st January following the end of the tax year |
Income Tax Due including Dividend Tax | By 31st January following the end of the tax year |
Payments on Account | 31st January and 31st July |
PAYE – Full Payment Submission (FPS) | Monthly on or before the date you pay your employees |
PAYE – Employer Payment Summary (EPS) | Monthly returns due by 19th of the following month |
PAYE (tax & NI) due | Monthly by 22nd of the following month if electronically made or 19th if sent by post |
VAT return | Quarterly, 1 month and 7 days following the end of the quarter |
VAT to pay | Quarterly, 1 month and 7 days following the end of the quarter although if paid by direct debit this is usually taken by HMRC on or around the 10th |
Briefly:
- a limited company pays corporation tax on profits which is due 9 months and one day after the end of the accounting reference date
- a director (or technically a shareholder being the owner of the company although generally they are one and the same person in a self employment situation) may also pay additional tax on the dividends taken from the company. The dividends will be declared on their self assessment tax return and any additional tax due paid by the 31st January after the end of that self assessment tax year. The director’s self assessment will also give details of any salary received form their limited company as well as any other income that they may have
- if a business employs people it will have to register for PAYE
- if a business exceeds the VAT registration threshold it will have to register for VAT. It can also register voluntarily before it reaches the threshold
Accounts
A set of accounts, also known as financial statements, are the summary of and output from the collection and analysis of the financial transactions of the business. Every business needs to produce them, even if it is just to prove that they do not need to file a tax return.
A basic set of accounts would comprise the Profit and Loss account and a Balance Sheet. In addition a set of accounts for a limited company will include notes and a director’s report (see https://companieshouse.blog.gov.uk/2021/09/07/when-and-how-to-file-your-annual-accounts-with-companies-house/). The accounts of a limited company do need to be in prescribed formats.
A limited company has to file accounts, in the prescribed format, with Companies House and HMRC.
Corporation Tax
This is the tax that a Limited Company will pay on profits. The current rates can be found on the GOV.uk web site (search for Corporation Tax rates). Corporation Tax rates are set by corporation tax year which runs from 1st April to 31st March.
Until 1st April 2023 the corporation tax rate had been set at one rate for a number of years. Then everything changed back to the far more complex and difficult to explain system that existed way back in the past.
Now there is a corporation tax rate for small companies (those with profits under £50,000) and a main rate of corporation tax (for companies with profits over £250,000). In between those two levels, £50,000 and £250,000 there is marginal relief which is derived by a calculation. If your accounting period is shorter than 12 months the limits (£50,000 and £250,000) are proportionately reduced.
HMRC have a tool to help calculate the marginal relief – see https://www.tax.service.gov.uk/marginal-relief-calculator.
This is a complicated area and something that is best left to an accountant to help with. If you do want more information you can refer to https://www.gov.uk/guidance/corporation-tax-marginal-relief.
Caution does need to be exercised for people who have more than one company. Again the limits are proportionately reduced by the number of associated companies that you may have. A company is an associated company of another company if one has control of the other, or both are under the control of the same person or persons. The Associated company rules may impact those who, for example, operate a buy to let property through a separate company or those who, for whatever reason, operate businesses through more than one limited company. If this is you then it’s time to speak with your accountant about your limited companies to assess the impact of the changes in corporation tax.
When it comes to Corporation Tax another thing to bear in mind is that the profit upon which corporation tax is paid can be different to the profit in your accounts. Generally this is because some costs are not allowed for tax purposes such as entertaining or depreciation. If your business is very straight forward and you do not have any major outlays on capital items such as cars, buildings or plant and machinery then in all likelihood the profit upon which corporation tax will be paid will be the same as in the accounts. However if your accounts are more complicated this really is an area to involve an accountant as they will be able to review your accounts and make sure tax is calculated on the right figure.
Company Corporation Tax Return (called the CT600)
Along with your accounts you will need to file a Corporation Tax return, known by the reference that HMRC have given it being a CT600, which will tell HMRC how much corporation tax the company owes as it includes a tax calculation known as a corporation tax computation.
The Corporation Tax return is due 12 months after the end of the accounting period.
However, and more importantly, the Corporation Tax needs to be paid 9 months and 1 day after the end of the accounting period. It should be obvious that the Corporation Tax cannot be paid without the tax return and calculation being prepared – how would you know how much to pay? Not only that but the annual accounts are due 9 months after the year end and these need to include the tax due. So in reality the deadline for filing the CT600 becomes irrelevant especially as most commercial software will file the accounts and CT600 at exactly the same time.
Caution – many a new business may attempt to file the accounts at Companies House themselves without preparing and filing the CT600. All too often this means that the corporation tax isn’t included in the accounts and they are incorrect. Even though there are readily available technology solutions which you can use to file your tax returns this is something best left to your accountant. Tax is complicated with a whole host of rules to know. It takes an accountant at least three years to learn about accounting and qualify to be a member of a professional accountancy body. That in itself should tell you that preparing the company accounts and CT600 is best left to the experts unless you have the time to keep up with the rules or have a background in tax.
First Year Rules
Like the accounts there are different rules for the first year as the Corporation Tax return cannot cover a period of more than 12 months.
Taking an example of a company that was formed on 5th January 2022, assuming that the company started to trade on the date that it incorporated, two tax returns would be needed for the year ended 31st January 2023:
• From 5th January 2022 (date of incorporation) to 4th January 2023 – this is a year being the maximum length a Corporation Tax return can be
• From 5th January 2023 to 31st January 2023 – the remaining days that the accounts to 31st January 2023 cover
This explains why you will likely get two corporation tax letters from HMRC in your first year; each will cover a different tax period. It is worth noting that the first accounting period for tax starts with date of commencement of trading.
Corporation Tax Reference Number
This is allocated by HMRC when the company is formed. It is a ten digit code sent in the post usually within 14 days of the company being registered with Companies House. This reference number will be used to file the Corporation Tax return for the company.
Corporation Tax Payment References
When it comes to paying your Corporation Tax you need to quote a payment reference so that HMRC cam match up the payment to the liability due. The Corporation Tax payment reference is 17 digits long. Importantly it is worth noting that this is not just your Corporation Tax reference number.
The Corporation Tax payment reference can be found on the ‘notice to deliver your tax return’, any reminders from HMRC about your Corporation Tax or in your company’s HMRC online account (go to ‘view account’, ‘accounting period’, then select the correct period). The reference changes with each accounting period meaning that you need to use a different one each time you make a Corporation Tax payment.
Ways to pay your Corporation Tax can be found at https://www.gov.uk/pay-corporation-tax.
Other Company References
It’s worth mentioning that a Limited Company will also have another couple of references related to their business being:
Company Number
This is the reference allocated to your company by Companies House when the company is formally registered. This is 8 digits in length being 8 numbers unless registered in Scotland where it will have a prefix of SC or Northern Ireland where it will have a prefix of NI followed by 6 numbers.
Company Authentication Code
This is 6 digits in length being a mixture of numbers and letters.
Both the company number and authentication code are not related to any taxes but are needed when it comes to filing important information at Companies House such as the accounts, the confirmation statement or forms to update key information about the company such as a change of address.
Accounting Reference Date
The accounting reference date is automatically set as the last day of the month when you registered your company with Companies House on set up, known as company formation. For example if your registered your company on 1st May 2022 then your first accounting reference date will be 31st May 2023.
Assuming that you start to trade as soon as you register the company then the first set of accounts will cover the period 1st May 2022 to 31st May 2023; a period longer than a year.
Accounts are drawn up to the accounting reference date, often called the year end, but this can be more than a year in the first year, as shown above, or if you change the accounting reference date, by moving the date out. Equally the accounts can cover less than a year if the accounting reference date is brought forward.
Accounts Due Date
Accounts need to be filed at Companies House 9 months after the end of the accounting reference date except in the first year when the filing deadline is 21 months after the date that the Company was registered.
This often catches people out and can result in a late filing penalty if you are unaware of the rules.
Let’s take a look at an example.
Your company was formed on 1st May 2022, as explained above, your accounting reference date would be 31st May 2023.
In the first year the accounts would need to be filed at Companies House on 1st February 2024 being 21 months after the company was formed. In subsequent years the accounts would be due on 28th February following the end of the accounting year.
Changing the Accounting Reference Date
There is a formal process to follow if you do want to change the Accounting Reference Date. An AA01 form needs to be lodged with Companies House. This can be done online. This will change the date on the Register of Companies. However, it will not change the date with HMRC as the two Government departments do not work together and are not linked. You will need to inform HMRC separately. Often this is done by filing the accounts and Corporation Tax Returns. Do bear in mind that HMRC will not automatically update the filing dates for Corporation Tax Returns. So whilst the date for filing the accounts at Companies House may have changed, the relevant due dates for returns will not have changed at HMRC.
Rules for Changing the Accounting Reference Date
There are a number of rules that must be followed when changing the Accounting Reference Date. E.g. you cannot change the date if the filing deadline has passed or the company is in administration amongst others.
The most important of the rules to bear in mind are that:
- You can shorten the accounting period as many times as you like, by a minimum of one day
Hack if accounts are late – if you think that you may not be able to file your accounts on time you can shorten the accounting period by just one day which will automatically give you 3 months more to file them! Beware that this will not alter the Corporation Tax Return due date or the date by which the Corporation Tax needs to be paid - You can only lengthen the accounting period once every 5 years and it must never exceed 18 months
The date that the accounts need to be filed will change if you change your accounting reference date. You will be able to see this reflected when you search your company record at Companies House.
Best advice – unless there is a compelling reason to do so then it is best to keep the accounting reference date as it is. In particular there is absolutely no need to change it to align the accounting reference date with the Tax Year.
Confirmation Statement
A much overlooked and misunderstood obligation for a limited company is the filing of the Confirmation Statement. The Confirmation Statement, previously known as the Annual Return and different to the company accounts, verifies that important standing information, such as registered office address, directors, shares and so on, held about a company at Companies House is correct.
This has to be filed at least every 12 months, although you can file more often, at Companies House along with a fee which is £13 if it is filed online or £40 if a paper form is sent. Realistically you would file online. The annual filing of the Confirmation Statement is mandatory and must be done even if the company is dormant or not trading.
You must file the Confirmation Statement within 14 days of the review period which is either 12 months after the date that the company was incorporated or 12 months after the date that the previous Confirmation Statement was filed.
The Confirmation Statement is very easy to file and something that can be done without the need for an accountant. There is a very short video produced by Companies House, which can be viewed on their YouTube channel (search Companies House YouTube File a Confirmation Statement), explaining the Confirmation Statement.
There is no fine if the Confirmation Statement is late. However, and bizarrely, Companies House will start a process that closes a company down if the Confirmation Statement is not filed. There is a huge impact of this; not least that it could result in the bank accounts being closed and any funds in them being transferred to the Crown! If this happens it can be reversed but that comes with legal costs and it is something that you may need an accountant to help with.
Self Assessment for a director
Routinely HMRC will register a director for self assessment when the company is set up. You’ll know that they have because you will receive a ten digit income tax Unique Tax Reference (UTR) which is specific to you and not related to your company. In addition HMRC will contact you each year to ask you to complete a return. If you do receive such a notice then you must complete a self assessment tax return by 31st January following the end of the tax year. If a Director of a limited company has received dividends upon which income tax is due, or has other untaxed income, then they will need to file a self assessment tax return. It is the tax payer’s responsibility to tell HMRC when they have untaxed income. So a self assessment may need to be completed even if HMRC hasn’t asked for one to be filed.