When Returns Are Not Filed

This article will deal with UK corporate annual returns, to Companies House and HMRC.

To answer the question posed by the title, what happens when returns are not filed is that you get penalties and fines. Companies House fines start at £100 and go up to £1500. Ultimately your company may have its assets appropriated by court decree, or be struck off.

Simply put, the state can ultimately instigate court action against the company to retrieve any tax monies it believes it is owed. It may also strike uncooperative companies off the register if they do not send in their annual returns.

If returns to HMRC are not submitted after a grace period, HMRC may 'determine' what you owe and you will not be able to dispute it. You can only change the amount owed by submitting your tax return.

If a company is struck off, its assets become the property of the state.

That is to say, the UK practices light-touch regulation, but if you do not feed the bureaucratic beast, it will devour your company in quite a mechanical way; nothing personal, just business!

The fines and penalties by HMRC increase in cost over time.

HMRC and Companies House want to keep their databases clean and Her Majesty's Government wants to get the tax revenue it needs to maintain the state. Cheeky little companies who can't be bothered to keep proper accounts and pay their dues create an administrative headache and a revenue loss which the state grinds down on, over time.

A common mistake new companies make is that they think that because they are not trading, they don't have to do any returns. This is wrong.

Dormant companies still have to do annual returns, which are not much different than if they had been trading and making money. The state still wants to know what you are up to.

One way to not submit returns on time is to miss the reminders that HMRC and Companies House send by email/letter.

- Make sure that your address provider has your correct forwarding address;
- Make sure that your payments to your address provider are up to date;
- Make sure that your listing at Companies House looks correct.

HMRC 'pulls' the latest company address information from the Companies House database. If the address is wrong on there, or you can't get access to that address, you will not get the important notification letters both HMRC and Companies House send when returns are due.

They also send login codes to get access to their respective websites. If you don't have these digitally, you have to request them by mail. They will only post them to the registered office of the limited company.

There are 3 yearly returns a company has to do annually:

1. A Confirmation Statement, to Companies House.

This is the one that is due a year after incorporation. It's basically an affirmation that what Companies House have in their database about your company is correct.

It's simple to do and you can do it online. If you fail to do it on time and it's unduly prolonged, however, Companies House do take action to close (strike-off) the company.

In this way Companies House keeps its database clean and up to date and maintains minimum oversight of UK limited companies.

We offer to do this return for our clients, for a small fee, which includes the fee payable to Companies House.

2. Accounts to Companies House.

After a year of trading, you have some months for your small company to submit a set of Accounts to Companies House.

TIP: Sign your company up at HMRC to submit your returns there, as they allow you to submit your finalised return to Companies House at the same time.

This is a huge saver of time and trouble. It also means that your HMRC and Companies House returns will match up!

Keeping accurate financial records can be a headache for a newbie businessman. Mastering two different financial submissions even more so. Making them tally is why people employ accountants. Someone who has reasonable financial knowledge can attempt to do their own returns if they have established login access at HMRC for their company.

3. A financial return, to HMRC.

See above.

In this return HMRC will not only collect your financial accounts but also issue you with a tax demand. A mistake new businessmen often make is that they don't realise the last filing date is also the deadline for the payment of any tax owed!

So it's smart to prepare and do your returns in good time. As well as the likelihood of getting increasing fines, the emotional stress is unpleasant.

Tip: If it's the first set of returns your company is filing, there is usually a long period and a short period, which means two CT600 (Company Tax Return Forms) are to be submitted. 

If you are not confident with administration, you should hire a competent accountant to do these returns for you.

Basic, simple returns are not hard for a qualified accountant to do. You can make it easier for him by keeping good financial records, preferably in a spreadsheet or bookkeeping software.

Read more about simple accounting for small businesses.