 | An excerpt from Lawpack's Limited Company Formation Kit. |
Once you have formed a limited company, you are obliged by law to file annual accounts and appoint an auditor to audit them (although there are some limited companies who are exempt from doing so).
The directors must pass a company resolution appointing auditors for the limited company; the auditors you choose to audit the annual accounts must be independent, i.e. not employees of the limited company.
Your limited company will need to prepare annual accounts for each financial year. Your first financial year may be shorter or longer than a year and will begin on the date of the limited company’s incorporation and end on the last day of the limited company’s ‘accounting reference’ period.
Unless you change it, your accounting reference date will automatically fall on the last day of the month in which the anniversary of the limited company’s incorporation falls.
To change the accounting reference date, you can give notice to the Registrar of Companies using Form AA01 (included in Lawpack’s Limited Company Formation Kit).
The limited company’s first accounting reference period is fixed as the last day in the month in which the anniversary of the limited company’s incorporation occurs. After that, a limited company can then change its accounting reference date either during its current accounting period or during the period allowed for delivering the annual accounts in question.
A limited company cannot extend an accounting period more than once in five years, unless certain circumstances apply.
Limited companies exempt from auditing
With certain exceptions, a limited company may qualify for exemption from the requirements of having an audit if it does not break any of the following thresholds:
- Turnover not exceeding £5.6 million
- A balance sheet not exceeding £2.8 million
- An average number of employees not exceeding 50
If it breaks just one of the above, the limited company must have an audit.
In any case, members holding not less than 10 per cent in nominal value of any class of shares in the limited company may, by written notice no later than one month before the end of a financial year, require the limited company to obtain an audit for that year.
If your limited company is a ‘small company’ and hasn’t entered into any transactions of accounting significance in the period under review, it may qualify as a ‘dormant company’ and avoid the need not only to prepare annual audited accounts, which have been examined by an accountant, but also the need to prepare full statutory accounts. Form DCA (for dormant company accounts) may be filled in instead.
Your accountant will be able to advise you on taking advantage of any of the above annual audit exemptions.
Further information
Article: When to file your annual accounts and annual return
Article: Annual General Meetings
Download: Appointment of Auditor form
Download: Proposal to Remove Auditors form
Download: Appointment of Company Secretary form
Download: Notice of a Board Meeting form
Download: All the company resolutions and company minutes you need for your business today
