Hello, I used “Year End Process” for the first time just after my first HMRC Micro-entity account webfilling. Since it’s my first accounting period, I just had to account for the Confirmation Statement but no other tax.
But next year, logically I will do this “Year End Process” absolutely after CS01 and Corporation Tax Accounting and Payment, that’s right ? There’s no other mandatory conditions to launch this process ?
Finally, should I archive my balance sheet before or after Y/E process with “Retained Profit & Undistributed Reserves” added ? It it relevant for HMRC ?
It’s seems that with the new webfilling for Micro-entities via Companies House, it’s no longer necessary to make two statements for the first year when the end date of accounting period has been moved.
I was able to make a statement from 10 March 2022 to 31 March 2023, that was accepted
Firstly, I am not an accountant, so take what I write with the due grain of salt.
The £13 for Companies House confirmation statement is not a tax - it is an allowable expense, meaning that you can offset your company turnover with it, lowering your profit, and thus lowering the tax you are due to HMRC. (I file it in a nominal account for allowable professional fees, acording to some discussion here in the forum).
I see the Year End Process as closing the books on that respective accounting year, signifying that it no longer accepts any changes to it - therefore, the year end process is the very last step I do for any given accounting year. Dates are approximate and just illustrate the rough timeline - except for the last date.
Here is my schedule of things I do for an accounting year, asuming that the year runs from 1 April 2022 to 31 March 2023 the following year, in the 9 months period between end of accounting year and when company tax owed must be paid.
Produce draft Profit/Loss and Balance Sheet reports – 1 April 2023
I run trial Profit/Loss and Balance Sheet calculations, consolidating data, ensuring that all evidence (invoice, receipts, etc) for expenses and costs are in place, that numbers add up, etc.
When I am satisfied that everything is ok, I move to the next step.
Calculate company tax owed – 1 July 2023
I use some Excel spreadsheets I developed for that purpose - it calculates tax owed accurate to the penny how HMRC is calculating it, but that is not important (for reasons see below).
Once I know how much tax is owed, I enter that into Quickfile as a Journal as follows (amounts are obviously examples): Date: 31 March 2023 Name: Company Tax for the year 2022-23 Debit: (8500) Corporation Tax Charge for the Year – £600 Credit: (2320) Corporation Tax – £600
Directors approve accounts – 1 August 2023
I run Profit/Loss and Balance Sheet calculations again, which this time will include the projected company tax owed. These are then discussed with the directors, including discussing of any details as the directors require.
Eventually, they approve the accounts, and I can move to the next step.
(In this step, I also have the Directors approve the Directors’ report, which is filed together with the accounts at Companies House but that is not the topic here.)
File Company Tax Return – 1 September 2023
File the company tax return with HMRC online. At the end of that process, HMRC will tell you exactly how much company tax is owed.
If the number HMRC gave you is different from what you calculated (they shouldn’t, except for a few Pounds due to HMRC rounding to the nearest Pound), then you need to change the Journal you entered in step 2 above to reflect those numbers.
Produce final Profit/Loss and Balance Sheet reports – 1 October 2023
Now that you know the exact tax owed, and updated in Quickfile, I run the reports again, as any change in the recorded company tax owed will affect the Balance Sheet (as it adds profit after tax to the Capitals and Reserve nominal account).
I keep these reports on record; you can print and archive them, or keep them electronically.
File Accounts – 1 October 2023
The accounts need to be filed with Companies House. You can choose to file only the Balance Sheet report, or also the Profit/Loss report, next to other elements of the accounts (I do not file the P/L report with Companies House).
Pay Company Tax – 1 December 2023
Once HMRC accepts the return (when filed electronically, usually a few days after filing), I pay company tax. I pay the amount HMRC tells me I owe, minus any interest accumulated from the previous year(s) if any.
In your current account in Quickfile, enter a transaction (or have a bank feed) and tag it as HMRC Corporation tax payment - this will now balance out the (2320) Corporation Tax liability account in Quickfile for you.
Check corporation tax account for interest – 1 January 2024
Now that the 9 month window for company tax has lapsed, I check again on my companies corporation tax account at HMRC.
Since I tend to pay company tax early, before the deadline, HMRC will calculate a small amount of interest and credits your corporation tax account they run for you (at https://www.tax.service.gov.uk/corporation-tax/org/-----redacted-----/account/balanceperiods?lang=eng). They do so on the last day of the 9 months deadline to pay corporation tax.
I create a journal in Quickfile as follows (values are examples): Date: 31 December 2023 Name: HMRC early payment interest tax return 2022-23 Debit: (2320) Corporation Tax – £1.00 Credit: (4910) Interest earned – £1.00
If HMRC credited you with interest, you can deduct this from the actual payment made in step 7 above, so that your Corporation Tax liability account balances out again.
Close books – 1 January 2024
This is the Year End Process. The purpose is to have a “clean slate” for all P/L accounts in Quickfile for the current accounting year. This also sets the accounting lock date to the last day of the accounting year (i.e. 31 March 2022 in this example).
You could already do this after filing the accounts with Companies House (as an inserted step 7), but I like to do that as the last thing for an accounting year for my company.
I realise this is quite a long-ish write-up of the process, but in reality it does not take that long - most of the time is spent waiting.
Depending on how much tax you owe, you could use the 9 months period (or what’s left of it) to park the tax monies in an interest-bearing account (the interest you need to declare as company income, of course), or pay early. For my company, a non-profit, that does not make much difference, so I pay early.
Hello @Michel, thanks for your very detailed post, I appreciate
Yes I put Confirmation Statement in the miscelleanous expenses, this is what is recommended.
Due to my Micro-entity status, HMRC has simplified the procedure for accounts filling and they transfer me automatically to a webfilling form hosted on Companies House service.
Concerning Tax Return, I thought I would have an automatic notification like for the deposit of accounts but no ! Suddenly I realize that I have to hurry before January 1st !!!
Thanks Michel for your reminder, I haven’t got the right reflexes yet…
As I have transactions in euros, I can’t use the online form, it seems that I have to use commercial software. Can’t wait for MTD !!!
There’s just a point that I don’t understand in your schedule.
Why do you create your Journal for Corporation Tax on 31 March 2023 since you’re going to do the Payment on December 2023 so in the next accounting period.
that is simple: That tax belongs in that tax year, not the following one (even though I do the accounts in reality once the year has concluded).
You need to do that, otherwise subsequent calculations are wrong, e.g., for dividend calculations, or the balance sheet in the retained profits (i.e., after tax) when you do the year end process.
Ok luckily this year I was not taxable because I had more expenses than income.
But next year, I’m going to be careful and get used to this “gymnastics” at the end of the accounting period. Finally I was still able to file my two tax return with CATO, all right.
Suddenly I realize that I have to hurry before January 1st !!!