What is the Accounting Reference Date?

The term ‘debtor' refers to an individual or company that owes money, or is in debt to an individual or organisation. An example would be a customer that has purchased a product or service from your business. In the balance sheet, debtors are listed under the current assets section.

In business accounting, amortisation is a method of calculating the value of a business asset over time. It is the process of spreading out the cost of an asset over its useful life.

In relation to loans, amortisation refers to the spreading out of loans into a series of fixed monthly installments.

The first accounting year end date for a new company is the last day of the month in which the first anniversary falls on. For example, if your company was incorporated on 15 January 2021, the first accounting year end date will be 31 January 2022.

For self-employed persons or employers, it can be challenging trying to understand the rules surrounding benefits in kind. These can be complicated; some benefits are taxable while others aren't, and it gets tricky figuring out which rules apply to your situation.

To make things a little easier to understand, we've written up a quick guide below. After reading our guide, you'll understand what benefits in kind are, have a clearer idea of which ones are taxable (and which ones aren't), and get an overview of what you need to do when it comes to reporting and paying taxes on benefits in kind.

Do keep in mind that this isn't a definitive guide, as HMRC's decision to impose a tax varies by situation. If you need specific advice, doconsult our specialist accountants at Forma.

As a contractor running your own limited company, you need to be aware of the following deadlines:

• File end of year accounts to Companies House: 9 months after your company year ends. If it is your first year, the due date will be 21 months from the date your company was incorporated.
• File your confirmation statement: This is due on the anniversary of incorporation each year
• File your corporation tax return: This is due 12 months from your company year end.
• Pay your corporation tax bill: Payment is due 9 months and 1 day after the end of the company year
• PAYE RTI (Real Time Information) Returns: A submission of your company payroll has to be submitted in real time each month to HMRC. This is due on or before the intended salary payment. Any tax due from this can be payable on a quarterly or monthly basis as follows:
• the 22nd of the next tax month if you pay monthly
• the 22nd after the end of the quarter if you pay quarterly
• VAT returns: Usually submitted on a quarterly basis, the company VAT is due to be filed and paid within 1 month and 7 days from the quarter end.
• Self Assessment tax returns: Your Self Assessment Tax Return is always due to be filed by the following 31st January after the end of the tax year. This date is also the same deadline for payment of any tax due but you may also have a payment on account due by 31st July after this.
• P11D: The submission of the company P11D will need to made by 6th July with any payment of National Insurance arising due by 19th July (22nd if paid electronically)

An annual return (AR01) is a document that all businesses are required to submit to Companies House each year. It details general information about a company, such as its ownership, capital position and management. The annual return has been replaced by the confirmation statement (CS01) since 30 June 2016.

You can change your company's year-end-otherwise known as the accounting reference date (ARD). Changes can be made to your current financial year or the year before.

Your company's financial year can be shortened as many times as you want, with the minimum duration you can shorten it by being one day. You can lengthen your company's financial year by up to 18 months once every five years. If other conditions apply, such as if your company is in administration, you'll be able to lengthen your financial year more often.

Taxable turnover is the turnover on which the seller is liable to pay tax.

Retained profits, or retained earnings are profits that a firm has earned to date (after deducting dividends or other distributions paid out to investors) and are retained in the company's accounts. In a balance sheet, retained profits are included under the owner's equity section.

As a self-employed person or small business owner, getting a good grasp of accounting fundamentals can feel like an uphill task.

As accountants who specialise in small business needs, we're familiar with the challenges that you face-and have put together a series of articles to help you easily understand the basics of accounting.

We've touched on key accounting terms & concepts and the differences between bookkeeping and accounting. Below, we'll dive in to explain what debits and credits mean in accounting.

Employment Allowance enables eligible employers to reduce their National Insurance bill by up to £4,000 each year.

HMRC's resource provides further details on checking if you're eligible, how and when to make a claim and what to do after you've made a claim.

A credit note is a document that a business issues to its customers. It is used whenever an invoice needs to be changed and re-issued, such as when a customer changes or cancels an order, or is charged an incorrect amount.

PAYE

RTI late filing will incur a monthly penalty of £100, depending on the number of employees you have.

Self Assessment

A late filing penalty of £100 is imposed if your tax return is up to three months late. The penalty increases if you're later than three months, or if you pay your tax bill late. Additionally, interest will be charged on late payments.

VAT

You may be required to pay a surcharge if you submit a late return. Surcharges for late payments or VAT return filings are indicated on the HMRC website.

Corporation Tax

HMRC's penalties are as follows:

• 1 day late: £100
• 3 months late: An additional £100
• 6 months late: Your total corporation tax bill will be estimated, after which a penalty of 10% of unpaid tax will be imposed.
• 12 months late: An additional penalty of 10% of unpaid tax will be imposed.
  

Company accounts

The following penalties for private limited companies will be imposed if you fail to file your accounts with Companies House on time:

• Up to 1 month late: £150
• 1 - 3 months late: £375
• 3 - 6 months late: £750
• More than 6 months late: £1,500

Fixed assets are property or equipment that a company owns, and uses in its day-to-day operations for income generating activities. These include machinery, equipment, buildings and land.

An aged debtors report shows a list of customers (debtors) who owe your business money, as well as the amount owed at any given time.

Tangible assets are physical assets or property owned by a company, such as equipment, buildings, and inventory.

Accruals refer to revenue that have been earned, or expenses that have been incurred but aren't yet recorded in a company's accounts.

Examples of accrued expenses include wages payable, bonuses, interest on loan and goods received.

One example of accrued revenue is accrued interest.

On the balance sheet, accrued expenses are recorded under the current liabilities section, while accrued revenue are recorded under the current assets section.

Statutory Sick Pay (SSP) is the amount of money mandated by law that every employee must be paid if they are too sick to work. Employees have to meet certain eligibility criteria to qualify for SSP.

The cost of sales is the accumulated total of all costs used to create a product or service, which has been sold. The cost of sales is a key part of the performance metrics of a company, since it measures the ability of an entity to design, source, and manufacture goods at a reasonable cost.