Year-end accounts

It can save quite a bit on Accounting fees if you are willing to keep tidy and organised financial records and negotiate with you Accountant for the simplicity that this should bring to his or her existence.

The purpose of keeping Financial Accounts is primarily to fulfil an obligation that exists as a sort of trade off legally for having limited liability status. The legal privilege of having such status is that the owners of the company – the shareholders – can only be sued up to the greater of the amount of capital that they introduced to the business and the amount of money in the company. All that said, having a legal claim upheld that the business does not pay can result in the company being put into liquidation, and this could involve subsequent restrictions in what the Directors of the company, who usually include the Contractor in this instance, who set up/and or who is deemed to be running the company. The Directors of the company need to sign off formally on them, with their signature captured to certify that they have been prepared with the requirements of Companies Law requirements.

Companies House

There are time restrictions within which year accounts must be filed with Companies House. There are also specific rules regarding when accounts must be filed for the first time after setting up as a IT contractor. The Government’s portal has improved dramatically in terms of these rules based type of queries and the following is a link to their specific filing requirements:

https://www.gov.uk/first-company-accounts-and-return/overview

A partnership or a sole trader does not have to publicly file their accounts as Companies House requirements do not apply to them. They may have higher liabilities in the case of a legal dispute as a result of not having limited liability literally, and it’s highly recommended that such individuals take out Professional Indemnity Insurance. It is still necessary to prepare Annual Accounts though in order to calculate the amount of Income tax that Sole Traders or Partners have to declare in their own Tax Returns. The time of the preparation of Accounts within a Partnership is often governed by the Partnership Agreement, a type of contract drawn up to agree the responsibilities and rights of the various Partners.