What Are Company Accounts?
What are company accounts? A practical guide to the annual financial statements UK companies must prepare and file, including what they contain, filing deadlines with Companies House and HMRC, and the different reporting requirements based on company size.
For an overview of different business types in the UK, see Business Structures .
Company accounts (also called annual accounts or statutory accounts) are the financial statements that every UK company must prepare at the end of each financial year. They provide a record of the company’s financial performance and financial position and must be filed with Companies House and submitted to HMRC as part of the Company Tax Return.
The requirement to prepare and file accounts is set out in Part 15 of the Companies Act 2006. The company’s directors are personally responsible for ensuring the accounts give a true and fair view of the company’s affairs.
What Do Company Accounts Contain?
A full set of statutory accounts typically includes:
Balance Sheet (Statement of Financial Position)
The balance sheet shows the company’s assets, liabilities and equity at the end of the financial year. It is a snapshot of what the company owns and owes on a specific date.
| Category | Examples |
|---|---|
| Fixed assets | Property, equipment, vehicles, intellectual property |
| Current assets | Cash, stock, trade debtors, prepayments |
| Current liabilities | Trade creditors, tax owed, short-term loans |
| Long-term liabilities | Mortgages, long-term loans, provisions |
| Shareholders’ equity | Share capital, retained profits, reserves |
The balance sheet must be approved by the board of directors and signed by a director on behalf of the board.
Profit and Loss Account (Income Statement)
The profit and loss account shows the company’s income and expenses during the financial year, arriving at the profit or loss for the period.
Key items include:
- Turnover (revenue from sales of goods or services)
- Cost of sales (direct costs of producing goods or services)
- Gross profit
- Administrative expenses and other operating costs
- Operating profit
- Interest payable and receivable
- Profit before tax
- Corporation tax
- Profit after tax
Notes to the Accounts
The notes provide additional detail and explanation for items in the balance sheet and profit and loss account. Required notes include:
- Accounting policies used in preparing the accounts
- Employee information including average number of employees and staff costs
- Directors’ remuneration
- Tangible and intangible fixed assets including depreciation
- Debtors and creditors analysis
- Share capital movements
- Related party transactions
- Post-balance sheet events
- Commitments and contingent liabilities
Directors’ Report
Companies that are not small must prepare a directors’ report that includes:
- Names of all directors who served during the year
- Principal activities of the company
- Business review (for medium and large companies)
- Proposed dividends
- Political donations
- Information on disabled employees and employee engagement
Auditor’s Report
If the company requires an audit, the accounts must include an independent auditor’s report giving an opinion on whether the accounts give a true and fair view in accordance with the applicable accounting framework.
Company Size Thresholds
The reporting requirements depend on the company’s size classification. A company qualifies as small, medium or large based on meeting at least two of three criteria for two consecutive financial years:
| Criterion | Micro | Small | Medium | Large |
|---|---|---|---|---|
| Turnover | Up to £632,000 | Up to £10.2 million | Up to £36 million | Over £36 million |
| Balance sheet total | Up to £316,000 | Up to £5.1 million | Up to £18 million | Over £18 million |
| Employees | Up to 10 | Up to 50 | Up to 250 | Over 250 |
What Each Size Can File
| Size | Accounts filed at Companies House | Audit required? |
|---|---|---|
| Micro | Micro-entity accounts (very simplified balance sheet and notes only) | No |
| Small | Abbreviated or filleted accounts (balance sheet and limited notes) | No (unless required by articles or shareholders) |
| Medium | Full accounts but may omit turnover from the version filed at Companies House | Required |
| Large | Full accounts including strategic report | Required |
Even companies that file reduced accounts at Companies House must prepare full statutory accounts for shareholders and HMRC.
Accounting Standards
UK company accounts must be prepared in accordance with an appropriate accounting framework:
| Framework | Applicable to |
|---|---|
| FRS 105 (Micro-entities) | Companies qualifying as micro-entities |
| FRS 102 (UK GAAP) | Most small, medium and large companies |
| FRS 102 Section 1A | Small companies applying FRS 102 |
| IFRS (International Financial Reporting Standards) | Companies listed on a regulated market (mandatory) or companies that elect to use IFRS |
Most private companies use FRS 102, which is the principal UK accounting standard. It sets out recognition, measurement, presentation and disclosure requirements for all transactions likely to arise in general-purpose financial statements.
For a broader introduction to accounting principles, see What is Accounting?
Filing Deadlines
Company accounts must be filed with Companies House and HMRC within specified deadlines:
Companies House
| Company type | Deadline |
|---|---|
| Private company (first accounts) | 21 months from date of incorporation |
| Private company (subsequent years) | 9 months after the end of the financial year |
| Public company (first accounts) | 18 months from date of incorporation |
| Public company (subsequent years) | 6 months after the end of the financial year |
HMRC
- Company Tax Return (CT600) must be filed within 12 months of the end of the accounting period
- Corporation tax must be paid within 9 months and one day of the end of the accounting period
- Large companies (profits over £1.5 million) must pay corporation tax in quarterly instalments
Late Filing Penalties
Companies House imposes automatic penalties for late filing of accounts:
| How late | Private company | Public company |
|---|---|---|
| Up to 1 month | £150 | £750 |
| 1-3 months | £375 | £1,500 |
| 3-6 months | £750 | £3,000 |
| Over 6 months | £1,500 | £7,500 |
Penalties are doubled if accounts are filed late in two consecutive years. HMRC also imposes separate penalties for late Company Tax Returns.
The Financial Year
The company’s financial year (also called the accounting reference period) runs for 12 months from the accounting reference date (ARD). The default ARD is the last day of the month in which the company was incorporated.
Companies can change their ARD by filing form AA01 with Companies House, subject to certain restrictions:
- Can extend the financial year to a maximum of 18 months
- Cannot extend more than once in five years (unless the company is in administration or Companies House grants permission)
- Can shorten the financial year without restriction
Accounts for Different Entity Types
Private Limited Company
A private limited company must prepare and file accounts as described above. The level of detail depends on the company’s size classification.
Limited Liability Partnership
An LLP must prepare and file accounts in a similar manner to a company. The accounts show the LLP’s financial position and the members’ interests rather than share capital.
Community Interest Company
A CIC files accounts in the same way as a standard limited company but must also file a CIC annual report (form CIC34) alongside the accounts.
Sole Trader
A sole trader does not file accounts with Companies House. Instead, they report their business income and expenses through their Self Assessment tax return filed with HMRC.
Directors’ Responsibilities
Under sections 393-414 of the Companies Act 2006, directors have specific obligations regarding accounts:
- Ensure adequate accounting records are kept (s.386)
- Prepare accounts that give a true and fair view (s.393)
- Approve the accounts and ensure they are signed by a director (s.414)
- Deliver accounts to Companies House on time (s.441)
- Ensure the accounts comply with the applicable accounting standards
- Provide the auditor with all information and explanations needed (s.501)
Failure to comply with these obligations is a criminal offence and can result in fines and, in serious cases, director disqualification.
Audit Exemption
Most small companies can claim audit exemption under s.477 of the Companies Act 2006. To qualify, the company must:
- Meet at least two of the three small company thresholds
- Not be a public company, banking company, insurance company or e-money issuer
- Not be part of a group that is required to prepare group accounts (with limited exceptions)
Even where a company is exempt, shareholders holding 10% or more of the shares can require an audit by giving written notice to the company.
Companies claiming audit exemption must include a statement on the balance sheet confirming:
- The company qualifies for exemption
- No notice requiring an audit has been received from shareholders
- The directors acknowledge their responsibilities for preparing accounts and keeping adequate records
Related Concepts
- Filing accounts with Companies House — step-by-step filing guide
- Companies House — where accounts are filed
- Director duties — directors are responsible for the accounts
- Confirmation statement — separate annual filing requirement
- Accounting — the underlying record-keeping process
- Registered office — the address to which accounts-related correspondence is sent