What are my accounting obligations as a director?
As a company director, you have a legal obligation to carry out certain accounting tasks and provide an accurate representation of your company’s financial status that can be relied upon by third parties.
This is described by HMRC as presenting a ‘true and fair view’ of your company. It generally requires being organised with your record-keeping, filing your accounts and returns, and paying the company’s tax bill on time.
In more detail, you’re legally obliged to do the following:
Keep proper accounting records to present a ‘true and fair view’ of the company
Your overarching obligation as a director is to present the company’s financial situation accurately, and in a way that is not misleading to others. Even though you probably hire an accountant to complete and submit your accounts, the ultimate responsibility for its validity lies with the director(s).
Fraudulent accounting practices are common, and there are a number of instances when the company’s financial position has to be relied upon by third parties – when applying for finance, and in shareholders’ meetings, for example. This is partly why this wide parameter is used as a safeguard.
Keeping proper accounting records
So what are ‘proper accounting records?’ All sales and purchases, business income and expenditure - anything related to the business must be recorded. Most companies use accounting software to do this, and HMRC are making the move towards fully digital record-keeping.
Your accounts must be clear and accurate so that the ‘true and fair view’ of the company’s financial position described above can be provided. Financial records must be retained for six years, but this can be in digital format for some of them rather than having to store the physical receipt or invoice.
File your accounts and tax return on time
Your company tax return (CT600) and accounts should be filed at the same time, but are sent to different places:
- The tax return is submitted to HMRC
- Company accounts are filed with Companies House
You have a duty to file all accounts and returns within the filing deadline, which is usually 12 months after the end of your company’s accounting period. You may be penalised for any errors, and late filing will result in financial penalties which increase as time goes on.
The confirmation statement was formerly known as an Annual Return, and must be submitted to Companies House each year. It provides information about your company, its directors and other office-holders, and reports any changes from the previous year.
Pay corporation tax
Directors must pay the company’s corporation tax liability - the normal deadline for this is nine months and one day after the end of the accounting period.
You have a legal obligation to pay yourself and members of staff correctly, deducting tax and National Insurance as required.
If you need help with your accounts or further advice on your obligations as a director, Handpicked Accountants can connect you with a qualified and experienced accountant in your locality.