Understanding UK Companies: Reporting Obligations and Taxes

Maintaining accounting records and preparing financial and tax returns is crucial for the administration of foreign companies. This article focuses on the main reporting obligations of UK companies to the registrar and tax authorities. In particular, we will look at the reporting requirements, tax implications, and audit rules for popular instruments in international business—UK companies, limited liability partnerships (LLPs), and LP partnerships.

Key Reporting Responsibilities

UK private limited companies have several reporting responsibilities. These include:

1. Submitting an annual Confirmation Statement.

2. Notifying Companies House of changes in a timely manner.

3. Keeping proper accounting records.

4. Preparing and submitting financial statements annually.

5. Conducting audits when required by law.

   
   

Annual Confirmation Statement

Each company must submit a Confirmation Statement (Form CS01) to Companies House within 14 days of the end of the review period. The review period lasts for 12 months, beginning from the date of incorporation or the anniversary of the last Confirmation Statement. This confirms that the company has reported all necessary information, such as details of directors, shareholders, registered office location, and persons with significant control (PSC).

Changes to industry codes (SICs), share capital, or shareholder information can be included with Form CS01. Other changes, like registered office address or PSC details, require separate forms filed within 14 days of the change. As of 2025, the filing fee is £13 (online) or £40 (paper).

Importance of Accurate Accounting

Companies must maintain proper accounting records under section 386 of the Companies Act 2006. These records must demonstrate and explain the company's transactions. They should disclose the financial position accurately and enable the preparation of financial statements in compliance with the law.

Records must include details of all received and expended funds, along with justifications, and must cover the company’s assets and liabilities. They should be kept at the registered office or another designated location and be available for inspection by company officers.

If records are maintained outside the UK, accounts and returns must be sent to the UK and be accessible for inspection. All records must be retained for at least six years from the date of creation for private companies, as specified by section 388(4) of the Companies Act 2006 and HMRC requirements.

Failure to comply with these requirements can lead to penalties. Offenders face fines and, in cases of fraudulent failure, can be imprisoned for up to seven years under section 387.

Financial Statements of UK Companies

A company’s financial year aligns with its accounting reference period. The first period starts on the date of incorporation and ends on the last day of the month in which the first anniversary occurs. This date is known as the accounting reference date (ARD). Subsequent periods are 12 months long, starting the day after the previous period ends and concluding on the ARD.

For example, a company incorporated on 7 September 2020 would have its first period ending 30 September 2021. The following period would run from 1 October 2021 to 30 September 2022.

The ARD can be modified using Form AA01. The period may be shortened without restrictions but can only be extended once every five years, for a maximum of 18 months—unless the company is in administration.

Financial statements must be prepared:

• In accordance with the Companies Act 2006 (using UK GAAP) or International Financial Reporting Standards (IFRS).

• To provide a true and fair view of the company’s assets, liabilities, financial position, and profit or loss.

  
  

Small companies submit a balance sheet and income statement, while micro-entities provide a condensed balance sheet. A company qualifies as small if it satisfies two or more of specific criteria as defined in The Companies Act 2006 (Amendment of Part 7) Regulations 2023:

• Turnover ≤ £12.6 million.

• Balance sheet total ≤ £6.3 million.

• Average number of employees ≤ 50.

  
  

Micro-entities meet two of the following criteria:

• Turnover ≤ £700,000.

• Balance sheet total ≤ £350,000.

• Average number of employees ≤ 10.

  
  

Dormant companies (those without significant accounting transactions, excluding permitted transactions like share subscriptions or filing fees) file simplified “dormant accounts” using Form AA02. The same deadlines and penalties apply as for standard accounts.

Directors bear the responsibility for preparing and approving financial statements, which must be sent to shareholders, debt instrument holders, and those entitled to notice of general meetings.

Under section 441 of the Companies Act 2006, financial statements must be submitted to Companies House within 9 months of the ARD for private companies (or 6 months for public companies). For a first period exceeding 12 months, statements must be filed within either 21 months from incorporation or 3 months from the ARD, depending on which is later.

If unforeseen circumstances hinder timely filing, companies may appeal to Companies House for an extension. Late filing incurs penalties, with director fines reaching up to £5,000 and daily penalties of up to £500 for ongoing delays. Civil penalties (as of 2025) include:

• Up to 1 month late: £150.

• 1–3 months: £375.

• 3–6 months: £750.

• Over 6 months: £1,500.

  
  

Failure to file may lead to the company being struck off the register and dissolved, with assets becoming state property.

Audit Requirements for Companies

Annual financial statements must be audited unless exempt under the Companies Act 2006. Small companies, micro-entities, and dormant companies often qualify for exemption. A company is regarded as dormant if it has undergone no significant business operations (excluding transactions like payments of fees or share subscriptions) since incorporation or the start of the accounting period while meeting small company criteria.

Tax Obligations and Company Tax Returns

Corporation Tax

A company is considered UK resident for tax purposes if:

• It is incorporated in the UK, or

• Its central management and control is situated in the UK.

  
  

The corporation tax rate is 19% (as of 2025, pending any Budget changes). UK-resident companies pay tax on worldwide income, with relief granted for foreign taxes already paid. Non-resident companies are taxed solely on UK-sourced income.

The tax base comprises business income and capital gains, with deductions available for ordinary business expenses. Dividends received from UK or foreign companies are ordinarily tax-exempt, and dividends paid by UK companies typically incur no withholding tax. Interest and royalties remitted abroad face a 20% withholding tax, unless reduced by a double tax treaty.

Relevant legislation includes controlled foreign company (CFC) rules, transfer pricing rules, limits on interest deductions, and a general anti-abuse rule (GAAR).

Companies are automatically registered for corporation tax upon incorporation, receiving a Unique Taxpayer Reference (UTR) from HMRC. A tax return must be filed within 12 months of the end of the tax period, regardless of profitability. If profits are ≤ £1.5 million, tax is due 9 months and 1 day after the tax period’s conclusion. For first periods exceeding 12 months, two tax returns may be required.

Value Added Tax (VAT)

The standard VAT rate stands at 20%, with reduced rates of 5% or 0% applicable for specific goods and services. VAT registration becomes mandatory if taxable turnover exceeds £90,000 in the previous 12 months or is anticipated to surpass this in the next 30 days. Voluntary registration is also permissible.

VAT-registered companies are obligated to file VAT Returns quarterly, even if no VAT is payable or refundable.

Payroll Taxes

Companies with employees are required to register as employers. They must withhold Pay As You Earn (PAYE) income tax and National Insurance Contributions (NICs).

In this article, we explored the financial reporting, tax implications, and audit obligations of private limited companies. The next article will cover taxes for limited liability partnerships and ordinary partnerships.