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Introduction

This booklet is a guide to the rules governing public disclosure of accounts by all limited companies.

The booklet covers three main topics:

1. Accounting reference dates (ARD). The ARD is the financial year-end. It is also the date that determines when accounts are due for delivery to Companies House. Every company has an ARD. Companies House must be told in advance when the date is about to be changed. It can be costly if you forget to tell us and prepare accounts to the wrong date. If you do, we will refuse registration of the accounts and you will have to prepare fresh accounts to the ARD held on record at Companies House.
   
    
2. Preparing and filing accounts. There are deadlines by which accounts must be prepared and delivered to Companies House. If you miss the deadline an automatic penalty will be levied, without exception. So it is important that you, your accountants and your auditors are aware of the filing deadline.
   
    
3. Content of accounts.This booklet cannot tell you how to prepare company accounts - your accountant has specialist knowledge of this. But it will tell you what documents make up a set of accounts, what exemptions you may be able to take advantage of, and whether you will need to appoint an auditor.

Community Interest Companies (CICs) need to be aware that there is an additional requirement when delivering their annual accounts. They must prepare and deliver to Companies House a ‘community interest company report’ with a fee of £15. This booklet does not provide any information about these additional requirements. For this, please visit www.cicregulator.gov.uk.

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CHAPTER 1
Accounting reference dates

1. What is a financial year?

Every company must prepare annual accounts that report on the performance and activities of the company during the year. The period reported on in the accounts is called the financial year. This starts on the day after the previous financial year ended or, in the case of a new company, on the day of incorporation.

A more precise term for a financial year is an accounting reference period

The accounting reference period ends on the accounting reference date (ARD) - see questions 2 and 3 - or a date up to seven days either side of the ARD, if this is more convenient.

2. How is the ARD fixed?

For a new company, the ARD is set using its date of incorporation - see question 3. You can change the first accounting reference period and subsequent accounting reference periods by changing the ARD - see questions 4 and 5.

3. What period must a company's first accounts cover?

For all new companies, the first accounting reference period is automatically set as the first anniversary of the last day in the month in which the company was incorporated. For example, if the company was incorporated on 10 June 1999 its ARD would be set at 30 June, and the first accounts would cover a period from 10 June 1999 to 30 June 2000 - or up to seven days either side of that date. Although the ARD is set on incorporation, you can change it - see question 4.

4. Can the ARD be changed?

Yes, by completing Form 225 and sending it to Companies House. But the change can only be made to the current or the immediately previous accounting reference period and you have to register the new ARD before the filing deadline of the accounts. In other words, if Companies House is expecting accounts for a particular accounting reference period and they become overdue, it is too late to say that you wanted to change the ARD. Private companies normally have 10 months and public companies 7 months to send their accounts to Companies House. The period allowed for sending a company's first accounts is calculated differently and this is explained in chapter 2.

5. Are there any restrictions on changing the ARD?

You may change an ARD by shortening an accounting reference period as often as you like and by as many months as you like. However, there are restrictions on extending accounting reference periods:

• You may not extend a period so that it lasts more than 18 months from the start date of the accounting period.
• You may not extend more than once in 5 years unless:
  
  (a) the company is subject to an administration order; or
  
  (b) the Secretary of State has directed this; or
  
  (c) the company is aligning its accounting reference date with that of a subsidiary or parent undertaking established within the European Economic Area. Countries comprising the European Economic Area are as follows:
  
  Iceland, Norway, Finland, Sweden, Ireland, United Kingdom, Denmark, Germany, Netherlands, Belgium, Luxembourg, Austria, Portugal, Spain, France, Italy, Greece, Liechtenstein, Czech Republic, Estonia, Cyprus, Latvia, Lithuania, Hungary, Malta, Poland, Slovenia, Slovakia.

• a branch in Great Britain, and which does not have to publish audited accounts in its country of incorporation; or
• a place of business in Great Britain;

is subject to the same ARD rules except that it is not restricted as to how often it may extend accounting periods. The same Form 225 is used to change the ARD.

A company incorporated overseas which has registered a branch in Great Britain, and which has to publish accounts in its country of incorporation is subject to different rules - see our booklet, 'Oversea Companies'.

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CHAPTER 2
Preparing and filing accounts

This chapter explains the basic rules on filing accounts. It applies to all company accounts irrespective of whether any filing exemptions apply to the content of the accounts.

1. Do all companies have to keep accounting records?

Yes. All limited and unlimited companies, whether or not they are trading, must keep accounting records.

2. What does a set of accounts include?
 

Generally, accounts must include:

• a profit and loss account (or income and expenditure account if the company is not trading for profit);
• a balance sheet signed by a director;
• an auditors' report signed by the auditor (if appropriate);
• a directors' report signed by a director or the secretary of the company;
• notes to the accounts; and
• group accounts (if appropriate).
• for financial years beginning on or after 1 April 2005, the directors of a quoted company (defined below) are also required to prepare an operating and financial review signed by a director or secretary. In this case, the auditors’ report must give an opinion on the information in the report. For further information regarding the Operating and Financial Review Reporting Standard, please visit the Financial Reporting Council’s website at www.frc.org.uk

Please note: For financial years beginning on or after 1 January 2005, the accounts may be prepared in accordance with international accounting standards.

3. Do all companies have to deliver their accounts to the Registrar?

All limited and public limited companies must send their accounts to the Registrar. If they are eligible and wish to, medium-sized, small, very small and dormant companies may prepare and file 'abbreviated accounts' - see chapter 3, 4 and 5.

Unlimited companies need only deliver accounts to the Registrar if, during the period covered by the accounts, the company was:

• a subsidiary or a parent of a limited undertaking; or
• a banking or insurance company (or the parent company of a banking or insurance company); or
• a 'qualifying company' within the meaning of the Partnerships and Unlimited Companies (Accounts) Regulations 1993 - see chapter 7 of this booklet; or
• operating a trading stamp scheme.

If the first accounts cover a period of 12 months or less, the normal times allowed for delivering accounts apply (see question 6).

6. How long do I normally have to file my accounts?

Unless you are filing your company's first accounts (see question 5) the time normally allowed for delivering accounts to Companies House is:

• for a private company, 10 months from the ARD;
• for a public company, 7 months from the ARD.

However, if the accounting reference period has been shortened, the time allowed for filing the accounts is the longer of:

• for a private company 10 months (or for a public company 7 months) from the ARD; or
• 3 months from the date of the notice (Form 225).

If a company carries on business or has interests overseas , and the financial year begins before 1 January 2005, a 3-month extension to the normal filing period can be claimed by delivering Form 244 to Companies House. This form must be delivered before the normal filing deadline and this must be done for every year that the company wishes to claim the extension. It does not automatically apply from one year to the next. ( Form 244 cannot be used for financial years which begin on or after 1 January 2005 but an extension to the filing period may still be granted in exceptional circumstances – see below)

An application may be made to the Secretary of State for Trade and Industry to extend the time for laying and delivering accounts if there is a special reason for doing so; for example, if there has been an unforeseen event which was outside the control of the company and its auditors. The application must be made in writing and be delivered before the normal filing deadline, and must contain a full explanation of the reasons for the extension and the length of the extension needed.

• The balance sheet must be signed by a director, with any statements about accounting or filing exemptions appearing above the director's signature.
• The directors' report, if one is required, must be signed by a director or the company secretary.
• If an auditors' report, special auditors' report or accountants' report is attached to the accounts, then it must state the names of the auditors or accountants and be signed and dated* by them.

* Applies to accounts covering a period beginning on or after 1st January 2005.

• use black ink or black type;
• use bold lettering (some elegant thin typefaces and pens give poor quality copies);
• don't send a carbon copy;
• don't use a dot matrix printer;
• remember - photocopies can result in a grey shade that will not scan well;
• use A4 size paper with a good margin; and
• include the company number in the top right-hand corner of the first page.

Glossy accounts

If you are producing colour-printed glossy accounts, please save them for your shareholders and others who will appreciate them. We still need black on white with a matt finish. A typed, unbound version of a printer's proof is ideal, provided it has the necessary signatures.

Each year around 6,000 sets of accounts are rejected due to inadequate legibility. The top 3 reasons include:

• Glossy accounts
• Shading over figure work e.g. to differentiate between the financial year in question and the previous year
• Poor print quality

14. Can I find out more about this?
For further guidance on print requirements contact 0870 33 33 636.

15. Are there any additional requirements for Community Interest Companies (CICs)?

Yes. The CIC must prepare a ‘community interest company report’ which must be sent to Companies House with the annual accounts and a fee of £15. Cheques should be made payable to ‘Companies House’. For further information about this requirement, please visit www.cicregulator.gov.uk.

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CHAPTER 3
Small and medium-sized company exemptions

1. What exemptions are available?

Certain small or medium-sized companies may prepare accounts for their members under the special provisions of sections 246 and 246A of the Companies Act 1985. In addition, they may prepare and deliver abbreviated accounts to the Registrar.

This chapter explains the exemptions available to small and medium-sized companies. Certain small companies with a turnover of less than £1 million (£250,000 for companies that are charities) and assets of less than £1.4 million can claim exemption from audit. This is dealt with in chapter 4.

The period accounts have to cover and the time allowed for sending them to Companies House is covered in chapter 2.

2. What is a small or medium-sized company?

Public companies and certain companies in the regulated sectors cannot qualify as small or medium-sized companies. Similarly, companies which are part of a group which has members who are public companies or companies in the regulated sector cannot qualify as small or medium-sized (except in certain circumstances - see question 4). For other companies, the size of the company (and in the case of a parent company the size of the group headed by it) in terms of its turnover, balance sheet total (meaning the total of the fixed and current assets) and average number of employees determines whether it is classed as small or medium-sized.

The exact conditions for qualifying as a small or medium-sized company are given below.

To be a small company, at least two of the following conditions must be met:

• annual turnover must be £5.6 million or less;
• the balance sheet total must be £2.8 million or less;
• the average number of employees must be 50 or fewer.

To be a medium-sized company, at least two of the following conditions must be met:

• annual turnover must be £22.8 million or less;
• the balance sheet total must be £11.4 or less;
• the average number of employees must be 250 or fewer.

Generally, a company qualifies as 'small' or 'medium-sized' in its first financial year, or in any subsequent financial year if it fulfils the conditions in that year and the year before. If the company ceases to be small or medium-sized, the exemption continues for the first year that the company does not fulfil the conditions. And the exemption continues uninterrupted if the company reverts to being small or medium-sized the following year - see the table below.
If you think the company might qualify as small or medium-sized, you should consult a professional accountant before you prepare 'special-provision' accounts. If you abbreviate the accounts, you will also need a special auditor's report for filing with the Registrar, confirming that the company qualifies to produce such accounts. This report is not needed if the company is exempt from audit - see chapter 4 on very small companies.

The following table may help you decide whether you qualify to prepare 'small' or 'medium' accounts.
The table applies to small companies. For medium-sized companies simply substitute 'medium-sized' for 'small'.

• the abbreviated balance sheet and notes; and
• a special auditor's report (unless the company is also claiming audit exemption - see chapters 4 and 5).

• the abbreviated profit and loss account;
• the full balance sheet;
• a special auditor's report;
• the directors' report; and
• notes to the accounts.

4. What if the company would qualify as small or medium-sized, except that it is part of a group which has members who are public companies or companies in the regulated sectors?

For financial years beginning on or after 1 April 2005*, certain exemptions are available for small and medium-sized companies which fall into this category.

• Small Companies may omit certain information from the directors' report prepared for its shareholders (that is, amount to be paid as dividend, business review, statement of market valise of fixed assets where substantially different from the balance sheet amount, miscellaneous disclosures and employee involvement) and the company need not deliver the directors' report to Companies House.
• Medium-sized companies may omit certain information from the business review in its directors' report (that is, analysis using key performance indicators so far as they relate to non-financial information).

(*After implementation, these provisions were subsequently back-dated to also apply to accounts covering a period beginning between 1 January 2005 and 1 April 2005 and ending on or after 1 October 2005).

5. Are there special rules for small and medium-sized groups?

Yes, a parent company need not prepare group accounts or send them to the Registrar if the group is small or medium-sized and none of its member companies is: a public company, a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity, or a person who carries on insurance market activity.

To qualify as small, a group of companies must meet at least two of the following conditions:

• aggregate turnover must be £5.6 million net (£6.72 million gross) or less;
• the aggregate balance sheet total must be £2.8 million net (£3.36 million gross) or less;
• the aggregate average number of employees must be 50 or fewer.

• its aggregate turnover must be £22.8 million net (£27.36 million gross) or less;
• the aggregate balance sheet total must be £11.4 million net (£13.68 million gross) or less;
• the aggregate average number of employees must be 250 or fewer.

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CHAPTER 4
Very small company audit exemptions

1. What exemption is available?

There is total exemption from audit for certain small companies (including very small charitable companies) if they are eligible and wish to take advantage of it. Some charitable companies are exempt from audit but must provide an accountant's report on the accounts (partial exemption). Further details about how to claim exemption are in this chapter.

2. Which small companies qualify for audit exemption?
 

To qualify for total audit exemption, a company must

• qualify as small (see chapter 3);
• have a turnover of not more than £5.6 million; and
• have a balance sheet total of not more than £2.8 million.

No. Audited accounts must be delivered to Companies House if the company falls into any of the following categories:

(a) A parent company or subsidiary undertaking (unless dormant for the period during which it was a subsidiary) except where:

• the group qualifies as a small group or would qualify if all the bodies corporate in the group were companies; and
• the turnover for the whole group is not more than £5.6 million net or £6.72 million gross; and
• the group's combined balance sheet total is not more than £2.8 million net (£3.36 million gross).

(b) A member of a group of companies in which any member is:

• a public company or body corporate which (not being a company) has power under its constitution to offer shares or debentures to the public;
• a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity;
• a person who carries on insurance market activity.

(c) A person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity (other than an appointed representative whose scope of appointment is limited to activities that are not regulated activities – see below).

“Regulated activity” does not include:

• arranging regulated mortgage contracts;
• assisting administration and performance of a contract of insurance;
• advising on regulated mortgage contracts; or
• dealing as agent, arranging deals in investments or advising on investments- where the activity concerns relevant investments that are not contractually based investment

(d) A person who carries on insurance market activity.

(e) An appointed representative within the meaning of s.39 of the Financial Services and Markets Act 2000.

(f) A public limited company unless the company is dormant - see chapter 5.

(g) A special register body or employers association under the Trade Union and Labour Relations (Consolidation) Act 1992.

(h) A company where an audit is required by a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares; or - in the case of a company limited by guarantee - 10% of its members in number. The demand for the accounts to be audited should be in the form of written notice to the company, deposited at the registered office at least one month before the end of the financial year in question.

• any member of a body listed below who, under the rules of that body, is entitled to engage in public practice, and who is eligible for appointment as a reporting accountant; or
• any person, (whether or not a member of any such body), who is eligible for appointment as a company auditor under the rules of that body.

9. Are annual accounts required if a company is not trading?

All limited companies, whether they trade or not, must deliver accounts to Companies House. However, a limited company may claim exemption from audit as a 'dormant company' if it has not traded during a financial year, and provided it meets certain other criteria (see chapter 5).

Dormant companies do not need to appoint auditors and can deliver even simpler annual accounts to Companies House. For more information about dormant company accounts, see chapter 5.

10. My company's articles of association state that the company must have an auditor but otherwise we would be exempt. What can we do?

Companies may decide to revise their articles of association to ensure that these do not stop them taking advantage of the audit exemptions. Companies with articles based on the model articles at Table A of the Companies Act 1985 are unlikely to have such problems. However, the 1948 version of Table A (and other similar earlier provisions) imposes an obligation to appoint auditors. Companies with such articles may wish to take legal advice about possible changes.

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CHAPTER 5
Audit exemption for dormant companies

1. What exemption is available?

Dormant companies can claim exemption from audit and need only prepare and deliver to Companies House an abbreviated balance sheet and notes. A profit-and-loss account and directors' report do not have to be included in dormant company accounts filed at Companies House but a directors' report must be provided to members.

2. What is a dormant company?
 

A company is dormant if it has had no 'significant accounting transactions' during the period.

When considering if a company is dormant you can disregard the following financial transactions:

• payment for shares taken by subscribers to the memorandum of association;
• fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns; and
• payment made in respect of civil penalties imposed by the Registrar of Companies for delivering accounts to the Registrar after the statutory time allowed for filing.

A company may not take advantage of the dormant company audit exemption if it is:

• a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity;
• a person who carries on insurance market activity.

If the company has not been dormant since incorporation, but has become dormant, it may take advantage of the exemptions provided that:

• it has been dormant since the end of the previous financial year; and
• it does not have to prepare group accounts for that year; and
• it qualifies as a 'small company' in relation to that year (see chapter 3), or would have qualified as small but for the fact that it is:
• a public company; or
• a member of a group of companies which included: a public company, a person who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity, or a person who carries on insurance market activity.

• an abbreviated balance sheet containing statements above the director's signature to the effect that the company was dormant throughout the accounting period. The full text of the required statements is as shown at question 4;
• any previous year's figures for comparison - even though there are no items of income or expenditure for the current year;
• certain notes to the balance sheet - a full list of items to be covered appears at the end of this chapter.

The following statements must appear above the director's signature:

(a) For the year ended . . . (date) the company was entitled to exemption under section 249AA(1) of the Companies Act 1985.

(b) Members have not required the company to obtain an audit in accordance with section 249B(2) of the Companies Act 1985.

(c) The directors acknowledge their responsibility for:

• ensuring the company keeps accounting records which comply with section 221; and
• preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the company.

• begins commercial or trading activities during the financial period; or
• would no longer qualify for some other reason.

• In format A, net assets must equate to the aggregate of capital and reserves.
• In format B, assets must equate to liabilities (including capital and reserves as balancing items).

Each entry must be an amount in figures (not words) or '0.00'. Companies House will not accept any document which shows 'Nil' where a figure should appear.

Each column of figures must be headed with the date on which the current and previous financial year ended.

For both formats, the matters to be included in the notes to the balance sheet, if applicable, can be found at the end of each example below.

When you are preparing your accounts, please follow the guidelines in question 13 of chapter 2.

DORMANT COMPANY BALANCE SHEET FORMAT A

COMPANY NO. ............................

COMPANY NAME ..........................................

BALANCE SHEET AS AT ..../..../.......

(a) For the year ended . . . (date) the company was entitled to exemption under section 249AA(1) of the Companies Act 1985.

(b) Members have not required the company to obtain an audit in accordance with section 249B(2) of the Companies Act 1985.

(c) The directors acknowledge their responsibility for:

i. ensuring the company keeps accounting records which comply with section 221; and
ii. preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the company.

DORMANT COMPANY BALANCE SHEET FORMAT B

COMPANY NO: ................................

COMPANY NAME: .............................................

BALANCE SHEET AS AT ../../....

(a) For the year ended . . . (date) the company was entitled to exemption under section 249AA(1) of the Companies Act 1985.

(b) Members have not required the company to obtain an audit in accordance with section 249B(2) of the Companies Act 1985.

(c) The directors acknowledge their responsibility for:

• ensuring the company keeps accounting records which comply with section 221; and
  ii. preparing accounts which give a true and fair view of the state of affairs of the company as at the end of the financial year, and of its profit or loss for the financial year, in accordance with the requirements of section 226, and which otherwise comply with the requirements of the Companies Act relating to accounts, so far as applicable to the company.

Approved by the board of directors on...............(date)

and signed on their behalf by.......................(Director)

Notes to the dormant company balance sheet

The following must be given as notes to the balance sheet:

• accounting policies, including those relating to depreciation and diminution in value of assets;
• authorised share capital;
• if shares of more than one class have been allotted, the number and aggregate nominal value of shares of each Class allotted;
• information relating to any redeemable shares allotted;
• information relating to any shares which have been allotted during the financial year;
• information about fixed assets;
• details of indebtedness;
• basis on which sums originally in a foreign currency have been translated into sterling;
• in respect to every item above (other than fixed assets) the corresponding amounts for the previous year;
• details of any subsidiary undertakings and of shares held in them, and why group accounts are not required;
• where the company has acted as an agent for any person, the fact that it has so acted;
• information about financial fixed assets that could have been included at fair value but which have been included in the accounts in excess of their fair value, and where no provision has been made for their diminution in value (applies to financial years beginning on or after 1 January 2005).

In addition, the following information may have to be given about the subsidiary undertakings:

• details of any undertakings in which the company has a 'significant holding', for example, the name and address of the business;
• the name of the company's ultimate parent company, and (if known) its country of incorporation;
• the names of certain intermediate parent companies, and their countries of incorporation or (if not incorporated) the addresses of their principal places of business;
• details of certain loans, guarantees and other such dealings made by the company in favour of directors and others.

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CHAPTER 6
Partnership accounts

The Partnerships and Unlimited Companies (Accounts) Regulations 1993 require companies which are members of 'qualifying partnerships' to prepare and attach accounts of the partnership to their own accounts.

1. What is a qualifying partnership?

A qualifying partnership is a partnership that is governed by the laws of any part of Great Britain if each of the members is:

(i) a limited company; or

(ii) an unlimited company or a Scottish firm, each of whose members is a limited company.

Note
(a) Any reference to a qualifying partnership in relation to a limited partnership is a reference to the general partners only.

(b) Any reference to a limited company, an unlimited company, a Scottish firm or another partnership includes any comparable undertaking formed under the laws of another state.

 

• a member of the partnership which is established under the law of a member state of the European Economic Area (EEA); or
• a parent undertaking of such a member.

• the name of each partner required to deliver copies of the partnership accounts to the Registrar; and
• the name of each partner incorporated in another EEA member state who is required to publish the partnership accounts in that state.

• an undertaking comparable to a limited company incorporated outside the United Kingdom or other EEA state; or
• an undertaking comparable to an unlimited company or partnership formed under the law of such a country with each of its members a limited or comparable undertaking; then

• a member of the partnership formed under the law of a member state; or
• a parent undertaking of such a member so established.

In this case the consolidated accounts must be prepared and audited under the law of the member state, and the notes to the accounts must show that advantage has been taken of this regulation. If this exemption is used, any member of the partnership must disclose on request the name of at least one member or parent undertaking in whose group accounts the partnership accounts are consolidated.

7. Are there any penalties for non-compliance?