The task of ensuring the finances of a company are handled properly is essential to the proper management of the establishment. Therefore, while deciding on how to go about it requires sound reasoning and planning. The hurdle to cross can be rather daunting; the paperwork can be overwhelming; there are several receipts to handle, and several other financial aspects of the business that needs adequate supervision. Experience can be a great asset in this situation, and you may not need the assistance of an accountant for the company. However, for limited liability companies and limited companies may require a lot of documentation and specifications, which are closely monitored by Her Majesty’s Revenue and Customs (HRMC) and the Companies House. Although, there are things one can put into consideration if the need to avoid hiring an accountant comes up and one has to do the task. These basic five points must be adhered to, and thoroughly satisfied.
1. Accuracy in the Financial Records Keeping of UK Based Limited Company:
One of the backbones of any accounting firm or financial statement is accuracy, and as simple as it may sound, it requires utmost concentration and focus, to achieve it. If anyone chooses to be the accountant of one’s firm that is a limited company, then consistency in the accuracy of the account is imperative. The account has to show the assets, the income revenue that is being made has to be well documented and clear for references. The expenses will have to be appropriately filed as well, and there must be full disclosure to all the liabilities available. There is a serious need to have records that date as far back as six years for the sake of auditing and reference to what they are in connection to, as regards the business.
Below are fundamental elements that the financial records entail without which justice would not have been done to the record keeping of the accounting of the limited liability company.
- A current, as well as, detailed documentation of the income and expenditure of the company.
- The entire listing of the assets that belong to the company
- All the debts owed by the company, all the credits that are owed to the company.
- A detailed inventory of the stocks belonging to the establishment at the end of that particular fiscal year.
- The stock takings used to develop the stock record.
- All merchandise purchased as well as the ones that the company sold are to be present in the account record as well.
- The complete list of the clients, both the ones that purchase the products and those that provide goods for sale to the company. However, the retailers may be exempted from this list.
Read: 3 crucial reasons why startups need auditing?
Once all the above elements are present in the account records, then you can now proceed to working out a proper and complete annual account for the company. In addition, all the taxable income will be sorted out, paid, and well documented. In the case where the business is doing higher than the current (2017 – 2018) value added tax threshold, which is £85,000 presently, and then the VAT has to be remitted every three months as well. All these are the specific tasks that you will have to carry out if the financial record of the business were to be managed effectively and accurately.
2. The Statutory Accounts of the Business
In order for transparency and fairness, the financial record of a company must be in order and prepared, regardless of whether the company is doing business or not. This is done to show the current state of the company, and it is expected to be ready by every year within nine months of the accounting reference date (ARD). How to calculate that is quite simple, count nine months from the month that your company was registered, it does not matter which day it was, just the month. This is sent annually to the Companies House as is required by law. You may need to be crosscheck or clarify what the essential details of the statutory account should be, here are a few tips that are crucial for it to satisfy the appropriate level of standard.
- The Statutory record must be done according to the guidelines of the United Kingdom Generally Accepted Accounting Practices (UK GAAP). Although, in some other cases it is acceptable if it is prepared according to the principle of the International Financial Reporting Standards (IFRS).
- A balance sheet of the total current assets, total current liabilities, and the stockholder’s equity, as at the last day of the company’s fiscal year.
- A cash flow data and the income sheet.
- The report of both the director and the auditor as far as the company is not exempted from auditing.
The statutory account is important for the shareholders and the HMRC, however, when making less than 6.5 million pounds in the United Kingdom, the balance sheet of the company, as well as, a few notes will suffice for submission to the Companies House. In the case of a business becoming dormant after some level of activities and transactions have been carried out, the company will have to file accounts with the HMRC, but if the business has been dormant since inception, only the balance sheet and the notes will be adequate.
3. Company Tax Returns and Corporation Tax
Countries of the world have made efforts in getting a uniform corporate law reform especially when it has to do with corporation taxes as well as tax returns, but there are still some specific peculiar to each nation. The United Kingdom stipulates that the tax returns of the companies must be turned in within that financial year. This fiscal year is unique to each company, and it is more of a 12-month than a calendar year. Therefore, before celebrating the anniversary of the business, all company taxes must be paid and the tax returns of the company must have been filed.
The HMRC accepts the Company Tax Returns through the internet, alongside the form CT600, the calculations of the corporation tax and the complete statutory financial records. Any losses that need to be carried forward into the next fiscal year needs to be declared, as well as, director’s loans, capital allowances, and asset gains are all compulsory aspects of this account that must not be omitted.
Read: Rakesh Jhunjhunwala’s Latest Portfolio, Holdings, News – 2018
4. Get a Tax Adviser, or an Accountant, or Pay for it
It is not compulsory to employ a tax adviser or an accountant if you are confident of accomplishing the tasks effectively, but if there is a doubt or incompetence in being up to date and accurate, then do not risk it. The challenge of taking such risk lies merely in your competence, because whatever amount you are saving by not employing an accountant, you may be forced to lose more than that on penalties due to your inadequacies. These are the fines that may be enforced should one miss the deadlines mentioned earlier:
- Yearly records cannot be sent in late because the Companies House punishes companies, and the fines can be as high £1,500, but the minimum can be £150. The penalties stay even when you skip it for a year, and it will also be doubled in the situation where you have been late for two years back to back.
- If and when the issue is not resolved appropriately, you will be prosecuted and mandated to pay a fine that may be up to £5,000.
- HMRC will force punishments extending from £100 – 10% of any late tax that is not paid. The HMRC punishes companies that owe tax returns for three consecutive years and charge them a base fine of £500.
5. Finding an Accountant
There are a few key things to put into consideration when choosing an accountant. The type of business you do, getting an accountant that suits your field and is knowledgeable about the particular industry you work is comforting and dependable. Do personal research about accountants and do not employ them merely as a result of someone else’s recommendation. Most reputable accountants have chartered status, as much as this does not guarantee competence; it is much reliable since they passed through professional scrutiny to become a chartered accountant. The cost of employment is another essential factor to consider; you should patiently consider different accountants. Remember that the prices say very little whether it is high or low, you still need to look at the complete image the individual represents and offers. When you finally decide on a likely candidate, meet with the accountant, ask questions, and discuss your vision and expectations, check to see if these align before moving forward with the decision-making. If you need any form of assistance, we will here to connect you and assist you once the need arises.
The fate of your companies lies on your decision making. Start your journey with a formation company and save your company from future problems.