Understanding your set of year end accounts & CT600
You’ve been working all year and, hopefully, been getting paid by your clients and withdrawing that hard earned money out of the company for yourself.
Everything seems to be going well, but how well? And how would you compare this to another company?
Year end accounts
The year end accounts are there to show a true and fair view of your company’s accounts. It’s important so that the company accounts can be comparable year-on-year and against other companies.
Every company, from a tiny one with sales of just £100 to the largest corporations listed on the stock exchange, generally follow the same accounting conventions and principles. It is this consistency that allows different companies to be compared by stakeholders, such as potential investors, customers or shareholders.
It allows you, as the director, to compare how well the business has done this year to last year, and possibly areas you need to strengthen. Through your year end, you’ll also be able to prove your income or assets to other interested third parties, such as banks.
If you're using Crunch, a lot of this information is provided to you in real-time throughout the year, but you still need to complete these year end documents. Many of the accounting principles that are so important for correct accounts to be produced will only be applied at year end by your accountants.
Company Tax return (CT600)
One very important external stakeholder of your accounts is the government and HMRC. The year end accounts are sent to HMRC via the Company Tax Return, which is formally called a CT600. This contains:
Full year end accounts
Amount of Corporation Tax to pay
Overdrawn director's loan account taxation (S455).
CT600s are limited to periods of 365 days, so if your accounts are longer than this (as they usually are in the incorporation), they will be split into two CT600s.
The full accounts are attached to the CT600 when filed with HMRC. HMRC will also have access to more information than other external users of the accounts who will only be able to download the abbreviated accounts from Companies House (unless you supply the full accounts, as is often requested by banks when applying for a business loan).
Year end reporting requirements
Exactly what you need to file depends on when the accounting period you’re reporting on started: