Small company accounts audit exemption
Discussion
Can anyone help calrify something?
I submitted abbreviated accounts for last year, claiming small company exception as per the Companies Act 1985, as I had done the previous two years.
They were rejected by the Inland Revenue, and they requested submission of full accounts by the end of Jan 2006.
Three years ago I was involved in another business venture, and my IT company was ticking over but essentially dormant. Turnover was less than £20k, and didn't justify a £1000 accountancy bill, so I submitted abbreviated accounts. I have since started trading again through this company, but turnover is still way less than £100k. Having submitted abbreviated accounts once, I decided to do the same again for 2004, and again for 2005. The 2005 accounts were rejected.
Now I just had an interesting conversation with the Inland Revenue, because I received a Corporation Tax reminder for the year to April 2005. Firstly, I HAVE submitted a Corporation Tax return (online), and paid the Corporation Tax due. I have an acknowledgement dated 5 Jan in front of me. That doesn’t count because they rejected the abbreviated accounts it seems.
I pressed on why the accounts were rejected, as the lady seemed to be suggesting that they were rejected purely because there was no P&L account submitted. I pointed out that I was claiming exemption as a small company, and that I didn’t need to submit a P&L account. She went off to speak to a manager and came back saying there was no accompanying computation either. I quoted the exemption
Now I’m quite prepared to bite the bullet and have my accounts drawn up (which I am having done, and its costing me £2k to have the last three years professionally redrawn), but I object strongly when they appear not to understand the law. Am I wrong, do I or do I not qualify for small company exemption under the Companies Act 1985?
I have submitted all the required returns, they have rejected them on the grounds that something which is not required to be submitted was omitted, and now they are going to issues penalties for late submission? I get the distinct impression that they don’t know what they are doing, and I am paying it.
I submitted abbreviated accounts for last year, claiming small company exception as per the Companies Act 1985, as I had done the previous two years.
They were rejected by the Inland Revenue, and they requested submission of full accounts by the end of Jan 2006.
Three years ago I was involved in another business venture, and my IT company was ticking over but essentially dormant. Turnover was less than £20k, and didn't justify a £1000 accountancy bill, so I submitted abbreviated accounts. I have since started trading again through this company, but turnover is still way less than £100k. Having submitted abbreviated accounts once, I decided to do the same again for 2004, and again for 2005. The 2005 accounts were rejected.
Now I just had an interesting conversation with the Inland Revenue, because I received a Corporation Tax reminder for the year to April 2005. Firstly, I HAVE submitted a Corporation Tax return (online), and paid the Corporation Tax due. I have an acknowledgement dated 5 Jan in front of me. That doesn’t count because they rejected the abbreviated accounts it seems.
I pressed on why the accounts were rejected, as the lady seemed to be suggesting that they were rejected purely because there was no P&L account submitted. I pointed out that I was claiming exemption as a small company, and that I didn’t need to submit a P&L account. She went off to speak to a manager and came back saying there was no accompanying computation either. I quoted the exemption
IR said:No mention of P&L account or computations. She repeated that the accounts were rejected because the P&L account and computations were not submitted, and said that I would be liable for the £100 penalty for late submission. She acknowledged that they have the corporation tax payment sat on the account.
“If the company qualifies (see question 2 and 3), unaudited accounts may be delivered to the Registrar in the form of an abbreviated balance sheet and notes.”
Now I’m quite prepared to bite the bullet and have my accounts drawn up (which I am having done, and its costing me £2k to have the last three years professionally redrawn), but I object strongly when they appear not to understand the law. Am I wrong, do I or do I not qualify for small company exemption under the Companies Act 1985?
I have submitted all the required returns, they have rejected them on the grounds that something which is not required to be submitted was omitted, and now they are going to issues penalties for late submission? I get the distinct impression that they don’t know what they are doing, and I am paying it.
Abbreviated Accounts are only allowed for submission of the accounts to COMPANIES HOUSE (not HMRC). Abbreviated Accounts are allowed at Companies House because accounts kept at Companies House are available to the general public. It was decided back in the 1980s that, for competition reasons, small companies could file shortened accounts at Companies House.
Abbreviated Accounts can only be submitted to Companies House if FULL ACCOUNTS have also been prepared (they cannot be prepared in isolation).
HM Revenue and Customs will not accept Abbreviated Accounts. They expect to see full format accounts with a detailed Profit and Loss account and all the disclosures required under Company Law and the accounting standards as set out in FRSSE (Financial Reporting Statements for Smaller Entities).
If HMRC had not returned Abbreviated Accounts in the past, they were incorrect to accept them in the first place. Unfortunately, HMRC is now peopled by individuals who do not understand their own rules and regulations.
Abbreviated Accounts can only be submitted to Companies House if FULL ACCOUNTS have also been prepared (they cannot be prepared in isolation).
HM Revenue and Customs will not accept Abbreviated Accounts. They expect to see full format accounts with a detailed Profit and Loss account and all the disclosures required under Company Law and the accounting standards as set out in FRSSE (Financial Reporting Statements for Smaller Entities).
If HMRC had not returned Abbreviated Accounts in the past, they were incorrect to accept them in the first place. Unfortunately, HMRC is now peopled by individuals who do not understand their own rules and regulations.
Eric Mc said:
HM Revenue and Customs will not accept Abbreviated Accounts. They expect to see full format accounts with a detailed Profit and Loss account and all the disclosures required under Company Law and the accounting standards as set out in FRSSE (Financial Reporting Statements for Smaller Entities).
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That was my understanding as well.
Incidentally if you had a company with a T/o of 20K and you maintained decent records if I were you I would have shopped around, £1k is a bit much to charge. I would have thought you would be looking at a maximum of £650 plus Vat.
T/o was significantly more in prior years, and it wasn't so much of an issue then. I do now have a "proper" accountant (his advice is the same), and he is busy redrawing the accounts for the last three years. IR are aware of this, and he thinks IR are being "petty an mean"! Well, they are the tax man, what else can you expect!
They are not being "petty". They are asking for what they are legally entitled to.
How can they review a set of accounts that doesn't contain any sort of detailed profit and loss account?
They require this information so that they can assess whther further investigation or enquiry is required. Much as I abhor the Inland Rebvenue at times, I see no problem with supplying them with reasonable information - especially when it's required by law
How can they review a set of accounts that doesn't contain any sort of detailed profit and loss account?
They require this information so that they can assess whther further investigation or enquiry is required. Much as I abhor the Inland Rebvenue at times, I see no problem with supplying them with reasonable information - especially when it's required by law
Eric Mc said:No, I see where you are coming from, but my (new) accountant has been in full and frank discussions with them with regard to drawing up the new accounts since mid Jan, they are fully aware of the situation (including a significant delay from my previous accountant in handing over), and they already have the corporation tax due. I want the accounts done properly, everything above board, which is costing me already. I actually think there was a mistake in the last set of accounts that were professionally drawn up by my previous accountant, hence redrawing the three years. They know all this yet they are still going to apply the £100 penalty. They are going to get what they are legally entitled to, and they know it, it's just going to be a few weeks late.
They are not being "petty". They are asking for what they are legally entitled to.
How can they review a set of accounts that doesn't contain any sort of detailed profit and loss account?
They require this information so that they can assess whther further investigation or enquiry is required. Much as I abhor the Inland Rebvenue at times, I see no problem with supplying them with reasonable information - especially when it's required by law
Oh, and I had an Inland Revenue investigation just last year, and despite only having submitted abbreviated accounts for the prior two years, that wasn't an issue - in fact nothing was. Clean as a whistle.
You may not think they're being petty, I couldn't possibly say, but my accountant, who otherwise has a good working relationship with the Inland Revenue, thinks they are. They are right, to the letter of the law, of course they are. Kind of the definition of petty though isn't it?
>> Edited by victormeldrew on Friday 31st March 22:56
Perhaps they are - but I would say that the fact only Abbreviated Accounts were submitted to them is what triggered the investigation in the first place.
About 95% of all investigations happen for a genuine reason, only about 5% are random (if that).
My philosophy is to give the Revenue TOO MUCH information. So far, it seems to have worked.
About 95% of all investigations happen for a genuine reason, only about 5% are random (if that).
My philosophy is to give the Revenue TOO MUCH information. So far, it seems to have worked.
Eric Mc said:No it wasn't, it was because I had taken a contract through one of their conscripted lackeys - an agency. It was an "IR35" investigation, so I suppose that were more focussed on where I was making my money than how I accounted for it.
Perhaps they are - but I would say that the fact only Abbreviated Accounts were submitted to them is what triggered the investigation in the first place.
About 95% of all investigations happen for a genuine reason, only about 5% are random (if that).
My philosophy is to give the Revenue TOO MUCH information. So far, it seems to have worked.
Good philosophy though, and one I intend to adopt! Lesson learned, move on.
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