“Pirates stole my accounts.”
“A goat ate my accounts.”
“I found my wife in the bath with my accountant.”
According to Companies House, the above are just some of the stranger excuses given by companies for not filing their annual accounts on time.
For owners of community interest companies (CICs) in the UK, the pressure to submit the annual accounts is no less intense. The submission deadline is also extra busy for CICs. In addition to preparing annual accounts, they also need to submit an annual report on all their activities during the year.
Accounting for CICs
Annual accounts, also known as statutory accounts, are prepared from a company’s financial records at the end of that company’s financial year.
These accounts are important because it shows how much corporation tax your company owes. It also shows financial transparency and attracts possible investors.
Copies of statutory accounts should always be sent to: Companies House, HMRC, all shareholders and those who attend the company’s general meetings.
Annual accounts include:
- A balance sheet – this shows the value of everything a company owns, owes and is owed up to the last day of the financial year.
- A profit and loss account – This shows the company’s sales, running costs, and the profit and loss it has made over the financial year.
- notes about the accounts
- a director’s report, unless you are a very small company with a turnover of £632,000 or less
The amount of detail you need to provide varies depending on the size of your company. You can get more information in the Companies House booklet: Life of a Company – Part 1 Annual Requirements GP2.
Submitting CICs Annual Accounts
Submission dates vary from company to company. This is determined by a company’s accounting reference date. This date marks the end of accounting period.
The accounting period starts on the day a company is incorporated. The first accounting reference date will fall on the last day of the month in which its first anniversary falls.
For example, if a company was incorporated on 7 March 2019, then its accounting reference date would fall on 31 March 2020. Subsequent accounting reference dates will automatically be on the same date each year.
If a new private limited company’s first accounts cover a period of 12 months or more, then the annual accounts must be filed 21 months after its incorporation. For a public limited company, the period is 18 months.
After your first accounting year, the normal deadline will be nine months after the accounting reference date.
Here’s an example. My private limited liability community interest company was incorporated on 7 March 2019. The accounting reference date then falls on 31 March 2020. My first annual accounts will need to be submitted on 7 December 2020.
If you are not sure about your CIC’s accounting reference date, don’t worry. You can always check this by searching the register on the Companies House website.
Your statutory accounts must meet the International Financial Reporting Standards or New UK Generally Accepted Accounting Practice. Choose an accountant who is accredited in the UK to make sure your accounts meet that standard.
More information is available on the UK government’s website.
To make life easier for yourself and your accountant, you may want to consider investing in cloud-based software to keep track of your CIC’s finances throughout the year. Inspire to Enterprise have written a good blog which contains seven tips for choosing the right accounting software for your CIC.
Annual Reporting for CICs
When you submit your statutory accounts to Companies House, you will also need to file an annual report about the activities your CIC has engaged in over the past year. This report is important because it shows the CIC Regulator that your company is still meeting the community interest test.
This report, also called the CIC34, must include:
- everything the CIC has done during the year to benefit the company
- how the CIC has consulted its shareholders
- dividends declared (or proposed) on shares and performance-related interest paid, and how these dividends comply with the dividend cap
- any information on the transfer of assets to another asset-locked body
There are two reasons why you should include as much information as possible in this report. The first is that Companies House will place this report on the public register, so it can be accessed by anyone including potential funders and investors. Secondly, this is really your opportunity to blow your company’s trumpet – to show how your social enterprise is transforming your local community.
Submitting CIC Accounts on time
It can be very costly if you fail to submit your statutory accounts on time. You could be fined up to £1500 depending on how late you submit. Remember, Companies House will not fall for any silly excuses as to why your accounts are late such as, “I found my wife in the bath with my accountant.”
It is important to start preparing your accounts early. For CICs, this is even more important as you can’t file your accounts online. Companies House will only receive it by post along with a £15 filing fee.
Read more about CICs:
- Why Form a Community Interest Company
- Deciding Between a CIC limited by guarantee and limited by shares
- Community Interest Funding
The importance of legal advice
The decision to form a community interest company should be taken very seriously, because once it is set up, the only way out is to dissolve the company and cease to exist or convert the CIC into a charity. All assets will need to be passed on to a nominated charitable organisation. It is therefore strongly recommended that an individual gets legal advice before forming a CIC.
At KG Accountants , we provide a cost-effective, high value solution to meet all of your CIC needs. if you need to register a new CIC then look no further!
All our CIC fees are fixed.
By giving you a fixed and competitive price, we can take the worry away when it comes to running your CIC; allowing you to concentrate on running your organisation.
Call us on: 0207 953 8913