Small limited company accounts and CT600: what actually needs filing?

A limited company can have twelve transactions in a year and still have real filing obligations. The volume of bookkeeping does not decide whether annual accounts and a Company Tax Return are required.

For a normal active private company, think of the year end as three related jobs:

1. prepare annual accounts;
2. calculate and pay Corporation Tax;
3. file the Company Tax Return with HMRC.

The deadlines are not all the same.

The main deadlines

For a typical private limited company, GOV.UK currently gives these headline deadlines:

The first year can be more awkward because the Companies House accounting period and Corporation Tax accounting periods do not always line up neatly.

What are annual accounts?

Annual accounts report the company's financial position and performance for its financial year.

They are prepared from the company's accounting records, which should include things such as:

• sales and other income;
• business costs;
• bank transactions;
• assets and liabilities;
• money owed by or to the company;
• director transactions;
• payroll and pension information where relevant;
• VAT records if VAT registered.

The accounts format and disclosures depend on the size and status of the company. Small and micro-entity rules can reduce some disclosure requirements, but “small” does not mean “nothing to file”.

What is the CT600?

The CT600 is the core company tax-return form used to report Corporation Tax information to HMRC.

A complete Company Tax Return normally includes more than a CT600 data sheet. Depending on the company, it can include:

• the CT600;
• supplementary pages;
• company accounts;
• Corporation Tax computations;
• supporting calculations.

If HMRC has issued a notice to deliver a Company Tax Return, the company has a legal obligation to submit the return even where the tax due turns out to be nil.

Companies House and HMRC are different filings

This causes unnecessary confusion.

Companies House receives statutory company accounts.

HMRC receives the Company Tax Return and supporting information for Corporation Tax.

The same underlying accounts feed both processes, but the filing obligations, deadlines and systems are different.

A successful Companies House submission does not prove that the Corporation Tax return has been filed.

What if the company barely traded?

A company with very few transactions can still be active for tax and accounts purposes.

Examples of activity include:

• issuing invoices;
• receiving customer money;
• paying suppliers;
• paying a director salary;
• buying equipment;
• earning bank interest;
• receiving investment income;
• incurring business expenses.

If the company is genuinely dormant, different rules can apply. Do not describe a company as dormant merely because it made little money.

What records should a company keep?

GOV.UK requires companies to keep accounting records including money received and spent, assets, debts and supporting financial documents.

Useful practical records include:

• business bank statements;
• sales invoices;
• supplier invoices and receipts;
• expense claims;
• loan agreements;
• director's loan-account records;
• payroll reports;
• VAT returns;
• contracts;
• details of asset purchases and disposals.

HMRC tax rules generally require company tax records to be retained for 6 years from the end of the relevant accounting period, subject to longer periods in some circumstances.

What if the books are already in Sage, Xero or QuickBooks?

That is useful, but accounting software is not the finished tax return.

Before year end, the bookkeeping still needs to be checked for issues such as:

• unreconciled bank balances;
• duplicated transactions;
• personal spending through the company;
• incorrectly coded VAT;
• director withdrawals;
• fixed assets treated as ordinary expenses;
• missing invoices;
• payroll balances;
• Corporation Tax adjustments.

For a clean small company, this review can be quick. For a messy company, the software can merely preserve the mess with admirable consistency.

Director's loan account problems

Small owner-managed companies often mix personal and company money.

If a director takes money from the company that is not salary, dividend or a reimbursed business expense, it may create a director's loan balance.

That can have Corporation Tax and personal-tax consequences depending on whether the balance is repaid, written off or outstanding at the relevant dates.

Do not wait until the accounts-filing deadline to discover that the director's loan account is large and unexplained.

Dividends also need proper records

A payment to a shareholder does not become a dividend merely because it was labelled “dividend” in the bank feed.

Dividends need sufficient distributable profits and appropriate company records. The accounting profit, Corporation Tax and dividend position therefore interact.

A simple year-end pack

Before giving the company to an accountant, prepare:

1. the Companies House number;
2. accounting year-end date;
3. bank statements covering the year;
4. bookkeeping file or software access;
5. sales and purchase records;
6. payroll reports;
7. VAT returns if applicable;
8. details of loans and finance;
9. asset purchases;
10. director/shareholder transactions;
11. previous accounts and Company Tax Return if available.

A small company with clean records can be a small accounting job. A small company with missing records, an overdrawn director account and three overdue filings is a different animal wearing the same Companies House badge.