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Overdue accounts can be the Achilles heel for early-stage and growing companies, who tend not to have access to an experienced finance team. Their struggle to file statutory accounts at Companies House is often symptomatic of systemic difficulties within the business, easily overcome with the right accounting support.
So, how do early-stage and growing companies access help to avoid the potentially severe consequences of late filing?
Often, responsibility for a set of company accounts at Companies House and tax returns at HMRC is given to an inexperienced employee or dealt with by the founder (or their unsuspecting partner!). These options may seem cost-effective at the time, but without an experienced accounting foundation, they could end up costing you dearly.
Making sense of the terminology (even the title’ statutory accounts’ sounds intimidating), deadlines and requirements is tough but seeking help and support isn’t – plenty is available.
Related article | How to achieve a fit-for-purpose finance function
Are the following questions keeping you awake at night?
- Am I spending too much time on accounting and finance when I could be growing the business?
- Do I need an accountant?
- Do I require an audit?
- Could someone more qualified be doing my accounting for less?
- What accounting policies do I need to adopt?
- Am I claiming the tax deductions that I am entitled to claim?
- Is my VAT, NI and PAYE being paid correctly?
- Am I entitled to claim R&D Tax incentives?
Related article | R&D Tax Relief: Don’t miss this valuable source of funds
These are common questions, but the good news is that help and support are readily available.
Overdue accounts – what could be going wrong?
If the following scenarios sound familiar, it’s likely that the person tasked with dealing with accounting and finance may already be struggling with overdue accounts:
- Growing businesses tend to lack the skills and experience of a senior accounting resource required to ensure accounting standards are met. For example, an inexperienced resource may be unaware that firms must submit tax returns and accounts to HMRC in XBRL format.
- Some firms may have insufficient controls and processes to produce accurate and timely accounts, track performance throughout the year and deal with unforeseen situations.
- Leaders who choose not to invest in effective and efficient accounting systems may encounter difficulties when it comes to gathering information and submitting accurate accounts.
Related Article | How to bridge the accounting skills gaps
Similarly, last-minute filing of accounts just before the deadline could be symptomatic of broader organisational issues within the company.
Fundraising or preparing for exit?
Beyond the short-term sting of a fine, entrepreneurs looking to raise funding or aiming for a successful exit should pay close attention to the due date of their accounts.
During the due diligence stage of a sale, a potential investor may use this tardiness to negotiate on market value seeing it as a sign of a poor control environment or reach the conclusion that the business is trading at the brink.
Filing late? Get ready for a fine
Companies House are becoming less tolerant of businesses missing the deadline for filing statutory accounts and confirmation statements. Mistakes and undelivered accounts can result in stiff penalties.
Penalties were introduced in 1992, and these regulations are now enforced under the Companies Act 2006.
Failure to deliver accounts on time is a criminal offence; the fine incurred depends on how late the accounts are filed and the type of business.
they are becoming less tolerant of businesses missing the deadline and submitting a late confirmation statement.
For private limited companies:
- Up to one month – £150
- One to three months – £375
- Three to six months – £750
- More than six months – £1,500
For public limited companies:
- Up to one month – £750
- One to three months – £1,500
- Three to six months – £3,000
- More than six months – £7,500
However, it’s not just the immediate monetary cost of the penalty of overdue accounts that founders must consider. Beyond the financial penalties, overdue accounts could also cause irreparable reputational damage to the firm.
How changing a company’s year-end could be a good thing
If founders cannot meet the submission deadline, a company may shorten its accounting period by one day to adjust the deadline by three months; essentially giving founders an additional three months to file the previous year’s accounts. Of course, you must offer Companies House a valid reason to do so.
In a similar vein, a company can lengthen its accounting period once every five years (or, to be more exact, notice can be given to extend an accounting period if it is within five years of an accounting period which has been extended).
However, to the more experienced reader, shortening and extending the deadline to gain additional time should be treated with caution. Neither of these options is available if accounts are already overdue.
Related article | How to change your company’s year-end (Companies House guidance)
Where can you find help?
There is plenty of help on hand if founders know where to look.
Instead of focusing on filing statutory accounts, founders of entrepreneurial businesses should be concentrating on revenue-generating activities and growing the business; leave the accounting to a qualified professional.
To avoid the fines associated with overdue statutory accounts and tax returns, the most cost-effective and efficient method is to consider an outsourced accounting solution.
Seeking support from a trusted partner like Isosceles will make the year-end pain-free and keep you on the right side of HMRC!
More information related to late filing penalty fees can be found at Companies House.
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