Accounting and accounting rules in the United Kingdom
Accounting Rules
- Tax Year
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The corporate tax year begins on 1 April. A company’s financial year normally is 12 months’ long and companies may prepare their accounts to any date. A company’s corporation tax accounting period is usually the 12-month period for which it prepares its accounts but special rules apply where the accounts cover a period of more than 12 months. For company accounting periods that straddle the start of the tax year, the taxable income is time-apportioned and taxed in accordance with the rates prevailing in the two tax years that the accounting year overlaps.
- Accounting Standards
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Financial statements of domestic and foreign public must be prepared in accordance with IFRS Standards (except in the case of foreign companies whose home jurisdiction’s standards are deemed by the UK to be equivalent to IFRS Standards). There are five possible financial reporting frameworks for SMEs, the most common being FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland. This framework is based on the IFRS for SMEs Standard with several modifications.
- Accounting Regulation Bodies
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Financial Reporting Council
- Accounting Reports
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English companies must keep account books where are registered all the operations of the company and establish annual accounts including an annual report, a profit and loss account, a balance sheet, a table of financial flows, an appendix, an opinion of the auditors, a statement upon losses and earnings recorded, the comparison between the movements of interests of the shareholders and a note upon the result on historical costs basis.
- Publication Requirements
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Financial statements must be prepared annually.
Small companies (those meeting two of the three following requirements: annual turnover of no more than GBP 10.1 million, balance sheet total not more than GBP 5.1 million and a workforce of no more than 50 employees) may submit a shortened balance sheet and notes, and a special auditors’ report.
Medium-sized companies (those meeting two of the three following requirements: turnover of no more than GBP 36 million and balance sheet total of no more than GBP 18 million and 250 employees or less) may submit as a minimum a profit and loss account, a statement of other comprehensive income, a balance sheet and a statement of changes in equity, a directors’ report, a strategic report, an auditor’s report and notes to the accounts.
- Professional Accountancy Bodies
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Chartered Institute of Public Finance and Accountancy
Institute of Chartered Accountants of Scotland
Association of Accounting Technicians
Institute of Financial Accountants
- Certification and Auditing
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Companies have to seek a statutory auditor to conduct an annual audit of the financial health of their organisation. Subject to meeting certain additional criteria, small companies may be exempt from the requirement to have their accounts audited.
For more information, consult the Financial Reporting Council.
- Accounting News
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Latest Update: August 2024