We at Instafile understand how daunting it is to start a new company and how stressful all of your obligations can be, so we thought it would be a great idea to give some introductory information to the world of statutory accounts and tax.
In this post, we will cover the basics by answering the most common questions new business owners have asked us regarding their statutory obligations, as well as show you how Instafile can help in those situations.
By designing Instafile with new businesses owners in mind, we have taken the complexity and scope for human error out of preparing your statutory accounts and tax return each year. If you use Xero, you can use our app to effortlessly and instantly prepare your accounts.
What are statutory accounts and the corporation tax return?
The statutory accounts are the year end financials that a limited (‘ltd’) company is legally obligated to send to Companies House.
For limited (‘ltd’) companies, the corporation tax return (also called the CT600) is a document that business owners must submit to HMRC after each year end to declare the tax due from the business.
Instafile will instantly prepare both your statutory accounts and your CT600 at the same time (after your year end). Don’t waste your precious time each year, undertaking the tedious exercise of taking numbers out of Xero and creating your own submissions. We want you to do what you love: run your business. Instafile will take care of the bureaucracy for you.
What is Companies House?
Companies House is the UK’s registrar of companies. It holds key company information about every limited (‘ltd’) company. A limited (‘ltd’) company has a legal obligation to keep that information up to date. Part of this requirement is done through the annual statutory accounts submission.
What is HMRC?
HMRC stands for Her Majesty’s Revenue and Customs. It is the department responsible for the collection of taxes. Limited companies have a legal obligation to submit tax returns to HMRC. Instafile can take the stress out of the preparation of this document by connecting to your Xero and pulling the correct numbers into the correct parts of the CT600 calculation.
What is Corporation Tax?
When you set up a limited (‘ltd’) company, your annual profits will be subject to Corporation Tax. You will be required to fill in a corporation tax return every year. Speaking to our customers, we know how stressful the corporation tax return can be. It can require many hours of work to get right. Instafile does this for you. Using our clever in-house software, we take your numbers from Xero and transform them to your CT600. You can then review and submit, all through Instafile. In this way, Instafile creates a strong documented link between Xero and your submission - perfect if you ever need to go back in future years and review.
Can I prepare the accounts and tax return myself?
There is no legal requirement to use an accountant to prepare your accounts if you are a small or micro company. “Small” and “micro” are defined by the government and it is easy to find this information on the gov.uk website. Broadly speaking, your company will be small if it has a turnover of less than £10.2m and micro if it has a turnover of less than £632k. There may be instances when accountants are advisable and you will find plenty of help guides on the internet for this. If you feel comfortable with your numbers and your company qualifies as a Micro-entity, then Instafile is the perfect tool to help you quickly and confidently prepare your statutory accounts and tax return.
What is the current rate of Corporation Tax?
The current rate of Corporation Tax for the period 1st April 2017 to 31st March 2018 is 19%. The rate of Corporation Tax is set to change in the years ahead. This is the current schedule:
In the event that there is a Corporation Tax rate change in your financial year, you will need to reflect this in your tax calculation. Instafile does this for you and is of course always up to date with the latest rate of Corporation Tax.
How do I file my accounts online?
Before filing your accounts, you will need to prepare them in line with the advice on the gov.uk website. You should also prepare your tax computations at the same time. When you prepare your accounts, you will have to choose a suitable Financial Reporting Standard for the final statutory report - you can read more about these on the frc.org.uk website. Once your final statutory report is ready, you can manually copy your numbers over to the appropriate template on the government’s webfiling service.
Not all companies are allowed to use the government’s filing service. You should check HMRC’s guidance for the full list of restrictions but, by way of example, you cannot use the government’s filing service if you have any of the following: leased cars, foreign income and currency transactions, non-trading income (except interest received), share premium account, called up share capital not paid, R&D costs, or chargeable gains or losses.
When using the government’s service you should keep a detailed electronic copy of your workings (also known as ‘working papers’) in case Companies House or HMRC want to check them with you. If you want to avoid the hassle of doing all of the above manually, then Instafile is a great choice for making the process quick and easy while helping you to avoid the common mistakes that can occur when self-filing.
What are the filing deadlines?
A limited (‘ltd’) company has 9 months from its year end to file its statutory accounts with Companies House. It has 12 months to file its accounts and tax return with HMRC but it has only 9 months and 1 day to pay any tax it owes. Instafile files both at the same time, to take the stress out of filing and provide a strong audit trail linking your statutory accounts with your tax filing (CT600). A lot of limited companies will put off their filing obligations until the last possible moment, fearing the time they need to sit down to prepare their accounts. With Instafile you don’t need to fear, our app will prepare your accounts any time after your year end.
Do I need to file a tax return even if I have made a loss?
Unless you have notified HMRC that your company is dormant, you need to file a tax return even if your company has made a loss. In many instances, this loss can be used to offset against future profits (see detailed information on the gov.uk website).