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Annual Accounts Penalties
Whether you’re a small business owner or run a successful large company, you need to make sure that your accounts are up to date and accurate.
Failure to do so can result in hefty penalties and fines, so it’s important to be aware of the rules and regulations surrounding annual accounts.
In this blog post, we’ll cover the different types of penalties you could face and how to avoid them.
How late your accounts reach regulatory bodies will determine the kind of penalty you will receive. The penalties are as follows:
- less than one month late – £150
- more than one month but not more than three months late – £375
- more than 3 months but not more than 6 months late – £750
- more than 6 months late – £1500
In all cases these fees double if you file your accounts late in 2 successive financial years.
Understanding Statutory Accounts Penalties
It is important to understand that statutory accounts penalties can occur if you fail to comply with the Companies Act 2006 and file your accounts late.
Failing to file a business’s statutory accounts on time could result in more than just fines, such as a restriction on the company’s ability to conduct transactions.
To avoid these penalties, it is vital that all businesses understand their statutory accounts filing requirements, and ensure they are met in a timely manner.
These penalties can range from a minimum of £150 for small companies up to £1500 for public limited companies. If a company fails to file statutory accounts within 9 months of the end of the accounting period, the company directors may be held personally liable for the penalty.
Furthermore, if the company fails to file statutory accounts again in the following year, the penalty is doubled.
You can see how important it is to ensure that you are always up-to-date with your statutory filings.
When is a late filing penalty applied?
When filing your annual accounts, there is often a deadline set by the relevant authority. If you miss this deadline, then you may be liable for a late filing penalty.
This penalty will usually be applied for any accounts that are submitted after the due date, regardless of how small the delay is.
The penalties can range from a few hundred to thousands of pounds, depending on the size of the business and the amount of time that has passed since the original deadline.
Strict record keeping can help the process and ensure you are up to date ahead of time.
How To Appeal a Late Filing Penalty
To appeal a late filing penalty the first step is to ensure that your accounts are up to date and accurate. Start by double-checking your business records, accounting software, and other financial documents to ensure that all information is correct.
If discrepancies are found, take the time to investigate and resolve them before filing.
Once the information has been verified, you can then submit an appeal to the relevant governing body.
When making the appeal, be sure to explain why the accounts were not filed on time and how you plan to avoid such situations in the future. There are strict guidelines to follow in order for an appeal to be successful, so saying you simply forgot isn’t going to be enough to get the penalty reversed.
If you feel like you should be able to reverse the penalty, you can use HMRC’s online service to appeal the decision.
You will be required to explain your situation and submit evidence if necessary.
HMRC typically takes 30 days to reach a decision regarding your appeal and will contact you via email or by post.
How To Avoid a Late Filing Penalty
Filing your annual accounts on time is essential for avoiding any late filing penalties. First, you should make sure to give yourself enough time to get your accounts up to date and accurate.
You should start by setting aside a specific time on a regular basis to work on gathering the information needed for your accounts and summarising it where you can. This will help keep you organised throughout the year and make sure you don’t miss any important deadlines.
You should also consider using cloud-based accounting software to help you track your finances and ensure accuracy. This will help you to quickly and easily access the data you need, as well as staying up to date with the latest changes in tax law.
Ensuring Regular Record Keeping
Regularly reviewing your financial records will help you spot any discrepancies or errors and can assist with forecasting and other decision-making tasks.
It is also important to keep these records as evidence incase your business ever faces an audit.
Summarising your financial documents on a regular basis is a good practice to follow. This will reduce the workload required when you need to produce your set of accounts.
You can also keep difficult and more complicated transactions fresh in your mind if you are reporting them more regularly; rather than trying to remember at your year-end.
Using Professional Help for Tax Advice
Hiring a professional to provide tax advice can help ensure you are compliant with the latest regulations and filing deadlines for your statutory accounts.
Misunderstanding or miscalculating these regulations can potentially result in financial penalties and other sanctions. Ensuring that all of your statutory accounts are in order is an essential part of running a business, and can provide peace of mind that you are meeting the necessary legal requirements.
In addition to financial accuracy, a professional (such as a limited company accountant) handling can drastically improve the financial health of your business.
They will be able to advise you on difficult tasks, capitalize on missed opportunities and help maximise your cashflow.
Not to mention an accountant is already familiar with the the complex rules and regulations revolving around limited companies.