Production of Limited Company Accounts and Tax Returns are the standard accountancy services that most people think of when they realise they need the assistance of an Accountant. It’s the ‘boring compliance stuff’ that some people think they can do themselves, and others

There are two filings of accounts that need to be done for Limited Companies every year:

  • to Companies House
  • to HM Revenue & Customs (HMRC)

Companies House Filings

In most circumstances for Small Companies, the option exists under the Companies Act 2006 (section 444(1)(b)) to exclude the Profit & Loss Report (and associated notes) and the Directors’ Report from the set of accounts that are filed with Companies House.

As the accounts filed with Companies House are on public record, this option allows for an element of privacy for Small Companies. Accountants will usually refer to these accounts as ‘Filleted Accounts’ or ‘Registrar Financial Statements’. In all other respects, the accounts need to be prepared under the appropriate Financial Reporting Standards (FRS), usually FRS102 (1A) or FRS 105 for most Small Companies.

HMRC Filings

HMRC require the filing of a full set of accounts along with the CT600 – which is the HMRC code for the Corporation Tax Return. When calculating the taxable profits in the Tax Computation there are usually items that we need to add back in to the profit and calculate ‘tax versions’ of those numbers, an example being depreciation calculated on fixed assets for account purposes, we add that figure back to the profit and calculate ‘Capital Allowances’ which is the same concept as depreciation, except the tax office decides how quickly (or slowly) we can recognise those purchases against the profits.

There are lots of rules surrounding calculation of coporation tax, lots of things you can do, can’t do or have to do differently. At SGW, we do regular CPD training to stay on top of developments in tax rule changes and we use expert advice to supplement our knowledge and experience where we need to (even we don’t know it all!!).

I’ve heard about iXBRL – what is it?!

iXBRL stands for ‘Inline eXtensible Business Reporting Language’ and what it means is that it tags item of data within the accounts so that Companies House and HMRC systems can read and ideantify everything electronically. These days, the vast majority of Accountants use software to prepare the accounts and tag them up at the same time.

Can I prepare and file my own accounts and tax?

Of course you can! There are software companies out there that sell to buisness owners which will allow you to prepare all your accounts and tax returns with all the appropriate presentational and FRS support. And if you don’t want to spend any money at all, you can also submit accounts and tax returns through the HMRC/Companies House websites if you have calculated all your numbers to enter into the boxes.

It is worth remembering though, that as Accountants, we spend many years taking exams and gaining experience in practice to learn how to prepare accounts and tax returns correctly. There is a lot to know about what you can and can’t claim and the rules are different between self employed and limited companies. We’re not saying you shouldn’t do your own accounts, but for peace of mind of it being done correctly, it is worth spending the money to engaging an Accountant to do this part of your business for you.

Also the time you spend figuring out how to prepare and file your own accounts and tax returns – maybe you should spend that time finding an extra client or customer who will pay you more than you are paying an accountant to do this particular job for you.

How do you calculate your fees for preparing and filing accounts and tax return?

Many accountants still price their services based on how many hours it has taken to complete the job, they ask their staff to complete time sheets (often to every 6 minutes – doesn’t that sound stressful?!) and they use that to calculate how profitable (or not) they have been.

At SGW Accountants, we don’t use time sheets and we don’t track how many hours a job takes to complete, we price the job based on the turnover and transactions of the company. So a company with low turnover and few transactions will have a much lower fee than a company with moderate turnover and many transactions.

Generally running a funance function for a company (which will be bookkeeping, credit control, payroll, year end accounts and all tax returns relevant for that company), you should be looking at spending between 1.5% to 3% of your turnover depending on how transaction heavy your business is.