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File Your Limited Company First Accounts

Some basic accounting advice will help you to avoid penalties if you started a limited company. Check how to line up limited company first accounts and Company Tax Return in the United Kingdom.

This guide will help anyone who wants to file their own limited company’s accounts – instead of hiring an accountant.

You will be tackling a lot of paperwork, receipts, invoices, calculations, and taxes.

Even so, get to grips with accounting and bookkeeping and you will soon be dealing with your own business finances.

As a general rule of thumb, sole traders use ‘relatively’ simple accounting procedures. But, running limited companies demands greater complexities for accounting and for tax filing requirements.

The main aim is to line up, or align, the reporting dates (deadlines) for accounts and the Company Tax Returns at the end of the first year for your limited company.

Having set up a limited company, and as an automatic process, you will have different reporting dates for the first time that you:

Note: In most cases, you will need to file (send) two tax returns to cover the first year of trading in business.

Your First Annual Accounts

As a rule, your limited company’s first accounts will cover a period of more than twelve (12) months. The simple reason for this is because:

  • They begin on the day that the company or organisation was first set up (‘incorporated’ in legal terms).
  • They end on the ‘accounting reference date’ (determined by Companies House). They will set it as the end of the financial year for the company (it aligns to the last day of the month the company was set up).

Example of Limited Company First Accounts:

The accounting reference date for a company set up on the 11th of May would be the 31st of May in the following year. In this example, your limited company’s first accounts would need to cover a period of 12 months and 3 weeks.
In the years that follow, the accounts would cover the financial year for the company from the 1st of June running through to the next 31st of May.

Your Company Tax Returns

The company ‘accounting period’ cannot be longer than twelve (12) months. This is the period covered by a tax return for Corporation Tax purposes.

Thus, it may be necessary to file two (2) tax returns to cover the period of the limited company’s first accounts. In this case, you would get two payment deadlines for paying your Corporation Tax bill.

In the years that follow, you would usually only need to file one tax return. Aligning them in this way means they would cover the same financial year as the accounts.

Several factors determine the actual dates of your first tax return (and whether you need to file two). It depends on whether:

  • Your limited company or organisation started trading on the same day that it was set up.
  • Your limited company or organisation did not start trading until a date after it was set up.

Note: You can do the accounting for your own limited company. Even so, it is often easier and beneficial to use the services of an accountant for these tasks.

Started Trading Same Day as Company Set Up

Filing two (2) Company Tax Returns meets the requirements when a company starts trading on the same day that it was set up. One return covers the first 12 months and the other covers the rest of the time covered by the first accounts.

An Example:

You set up the company and started trading on the 11th of May 2015. So, the first accounting period for Corporation Tax would end on the 10th of May 2016.

With an accounting reference date of the 31st of May 2016, the second accounting period for Corporation Tax would end on the 31st of May 2016.

You would prepare the first set of accounts for a period from the 11th of May 2015 to the 31st of May 2016. You would then file the first tax return for the 11th of May 2015 to the 10th of May 2016. Filing the second tax return would occur for the 11th to the 31st of may 2016.

As a rule, the accounts and tax returns would then cover your limited company’s financial year running from the 1st of June to the 31st of May.

Started Trading after Company First Set Up

Limited companies can be inactive or ‘dormant’ for the purposes of Corporation Tax. The period of inactivity (non-trading) for dormant companies and associations runs between incorporation (setting up) and when they start to trade for the first time.

You would inform HMRC of the date you start trading when you incorporate a private limited company and register for Corporation Tax.

The requirements for a company that was dormant would depend on whether it got registered for Corporation Tax before its accounting reference date.

Note: HM Revenue and Customs provides detailed guidance on the differences between trading and non-trading. It also explains what counts as dormant for Corporation Tax purposes.

Registered for Corporation Tax before Accounting Reference Date

As a rule, registering for Corporation Tax before your accounting reference date means you would:

  • Not file a tax return for the period that the business was dormant.
  • Prepare the first tax return to cover the period that you were trading.

Note: In this case, you should file two (2) tax returns if you were trading for more than twelve (12) months. One would cover the first 12 months of trading and the other covers the rest of the time.

An Example:

Suppose you set up the company on the 11th of May 2015 but you didn’t start trading until the 22nd of July 2015.

You register for corporation Tax on the 26th of August 2015 and you get an accounting reference date of the 31st of May 2016.

You would prepare accounts for the 11th of May 2015 to the 31st of May 2016. You would file one tax return for the trading period running from the 22nd of July 2015 to the 31st of May 2016.

As a rule, the accounts and tax returns would then line up with your limited company’s financial year running from the 1st of June to the 31st of May.

Note: the details on the ‘notice to deliver a Company Tax Return’ you receive after the first year. You must file two tax returns if it covers the dormant and trading periods. One return covers the trading period and the other covers the dormant period.

Did Not Register for Corporation Tax before Accounting Reference Date

What if you didn’t register for Corporation Tax before your accounting reference date? In this case, you need to file two (2) tax returns. One covers the dormant period and the other covers the period that you were trading.

An Example:

Suppose you set up the company on the 11th of May 2015 but you didn’t start trading until the 22nd of July 2015.

You get an accounting reference date of the 31st of May 2016.

You would prepare one set of accounts for the 11th of May 2015 to the 31st of May 2016. You would file the first tax return for the ‘dormant’ period running from the 11th of May to the 21st of July 2015.

You would file the second tax return for the trading period running from the 22nd of July 2015 to the 31st of May 2016.

As a rule, the accounts and tax returns would then align with your limited company’s financial year running from the 1st of June to the 31st of May.

Lining Up Your Limited Company’s First Accounts and Company Tax Return in UK