Business in the UK has a lot of advantages, which require knowledge and attention. For example, preparing reports seems like a difficult task, but if you look deeper, it becomes clear that it is quite possible to prepare all the documents without errors. If you are planning to do business in England and you are concerned about questions such as “Should I use my home address for my business?”, “How to prepare financial statements?”, then this article is for you.
What Are Financial Statements?
All legal entities registered in the UK are required to submit a report called the Annual Return to the authorised bodies once a year. It is drawn up according to the AR01 form. In addition, annual financial statements must be submitted to the department.
AR01 contains the following information:
- name of the company;
- registration number;
- address;
- type of company;
- activities;
- management information;
- information about the founders;
- information about the authorised capital;
- information on the number of issued shares.
The data from both reports is publicly available and can be viewed by anyone. Copies of documents are also sent to shareholders. In addition, an income tax return is submitted, which is drawn up in the CT600 form.
All reports in the United Kingdom must comply with the Generally Accepted Accounting Practice (GAAP) standard, approved in 2015. If an organisation trades on an exchange, it applies IFRS international financial reporting rules. They can also be used by small and medium businesses.
It is worth considering that British government agencies like companies to report promptly and in accordance with the rules. If you take into account all the features of drawing up and submitting documentation in advance, the procedure will go without problems, easily and quickly.
We recommend that you use virtual office services if you only have a home address for business. The virtual office provides mail forwarding services, which will allow you to always stay in touch with regulatory authorities and timely prepare financial statements.
Who Accepts Financial Statements?
Financial statements in the UK are sent to Companies House – Companies House of the United Kingdom. This body registers new legal entities and collects data on existing ones. It takes into account all the changes that occur to companies, including changes in address, management, size of authorised capital, and shareholders. To clarify this information, reporting is collected.
The tax return is submitted to Her Majesty Revenue and Customs – a British department that performs the functions of the tax service and customs authority. Its main task is to collect fiscal payments, including excise taxes. It is not subordinate to any ministry but is supervised by the financial secretary of the royal treasury. The agency collects reports to verify the correctness and timeliness of tax payments by the company.
Report Submission Deadlines
In the UK, legal entities submit financial reporting forms to the authorised bodies annually: every 6 months for public companies and every 9 months for private ones. It is important to consider specific dates. For example, if a private company filed its report on April 4, then the following documents must be submitted by midnight on January 4 of the following year (not January 31).
Penalties For Late Reporting
If the company’s financial statements are not submitted to the relevant departments within the established time frame, the legal entity is liable for this in the form of a fine. Its amount is 750 pounds sterling, and it is charged monthly – for each month of delay. In case of malicious evasion of submitting data, the director of the organisation may face criminal liability. In some cases, a violation may lead to the liquidation of the company.
Failure to timely submit financial reporting documents will not allow you to receive a Certificate of Good Standing – a certificate of the organisation’s condition. This will lead to a decrease in confidence on the part of potential business partners, as it may indicate an inability to pay taxes and fulfill other obligations of the legal entity.
Reporting For LTD
Form AR01 is universal for all companies. LTD is no exception – it will submit a general report. As for the tax return, for this type of legal entity, it must contain information about taxable income.
The basic corporate tax rate for LTD is 25%. In some cases, it can be reduced to 19%. Limited Companies are required to pay VAT, the basic rate of which is 20%, but for some goods it is reduced to 5%.
Reporting For LP Partnerships
The LP files financial statements provided that the partners are residents and the company carries on business within the United Kingdom. In this case, it will also pay corporate tax on a general basis.
Reports are similar to LTD. If the partners are not UK residents and the company operates outside the country, the Limited Partnership effectively operates on a tax-free basis. Even when filing financial statements, Companies House does not disclose information about the beneficiaries of the LP.
Reporting For LLP
LLP is an acronym for Limited Liability Partnership. In this type of company, all partners have limited liability for the obligations of the organisation.
The tax treatment of an LLP is similar to that of an LP. The income of the partners, not the partnership, is taxed. Therefore, if they are not residents of the UK, they will make fiscal payments in accordance with the legislation of the state in which they live. They are also not required to file reports. In other cases, standard corporate tax is paid.
Wrapping It Up
The United Kingdom is renowned for its open and competitive business environment. There is a developed infrastructure, a stable political environment, and a transparent system of laws and regulations. If you are looking for a reliable assistant in opening and running a business in the United Kingdom, we recommend paying attention to The Hoxton Mix. The company provides virtual office services because using a home address for business is inappropriate.
