Accounting reference date

Each company needs to set an accounting reference date (or “year-end” date) which it will prepare its accounts to each year. When the company is incorporated the year-end will, by default, be set as one year from the end of the month of incorporation. For example, a company incorporated on 16 August 2024 will prepare its first set of accounts for the period ending on 31 August 2025.

You can change an accounting reference date by shortening an accounting period as often as you like and by as many months as you like. However, there are restrictions on extending accounting reference periods, as follows:

• An accounting period cannot exceed 18 months in length unless the company is in administration

• A company cannot extend its accounting reference date more than once in five years except in particular circumstances.

Preparing and filing annual financial statements

All companies must prepare and publish financial statements on an annual basis that report on their performance and activities during the financial year.

These must be prepared in accordance with accounting standards, including the upcoming amendments to FRS 102, which will introduce a new model for revenue recognition and on-balance sheet lease accounting, effective from 1 January 2026.

Under Companies Act 2006, private companies must file their accounts with Companies House within 9 months of their accounting period end date, while Plc’s must file their accounts within 6 months.

Take a look at our audit requirements section, to find out if your company is required to undergo mandatory audits.

Audit requirements

Audits, whether mandatory or optional, offer a thorough review of your accounts to help ensure smooth business operations. Companies that meet the threshold are required to have their accounts audited to confirm their financial statements provide a true and fair view, in accordance with International Auditing Standards.

The new company size thresholds listed below, effective from 6 April 2025, stipulate the type of financial statements a company prepares and whether it requires a statutory audit. This means many small companies will no longer require mandatory audits, however businesses can still choose to have audits conducted voluntarily. Specifically, the new thresholds are increasing as follows:

• Micro entities: Turnover from £632,000 to £1 million; Gross assets from £316,000 to £500,000; Employee numbers remain at 10.

• Small companies: Turnover from £10.2 million to £15 million; Gross assets from £5.1 million to £7.5 million; Employee numbers remain at 50.

• Medium-sized companies: Turnover from £36 million to £54 million; Gross assets from £18 million to £27 million; Employee numbers remain at 250, with a consultation planned to potentially increase this to 500.

If a company is in receipt of grant funding it is usual that the grant-making body will require a grant audit to be carried out if the company’s claim for that funding. This work is carried out in accordance with the specific requirements contained within the grant.

Tax

Companies are also required to account to HMRC for certain taxes. The main administrative requirements for each tax are summarised below:

Companies with taxable profits of £1.5 million or less are required to pay their Corporation Tax within 9 months and 1 day of their year-end. The corporation tax return (CT600) has to be filed with HMRC within 12 months. It's now mandatory to file both your financial statements and corporation tax returns electronically.

VAT returns will generally be submitted quarterly and must be submitted by day 7 of the second month following the quarter-end – for example a VAT return for the quarter to June must be submitted by 7 August. Companies can elect to account for VAT monthly. This has a cash flow benefit when the company is regularly in a position where it receives a refund from HMRC (input tax exceeds output tax).

Payroll compliance and benefits reporting

Companies with employees (including directors) are required to file numerous forms to report to HMRC and ensure the correct deductions are made from employees’ pay. 

Payrolling will become mandatory from April 2026 for reporting taxable benefits to HMRC in real-time, except for no/low interest loans and living accommodation. Employers will have the opportunity to voluntary payroll these two excepted benefits from April 2026.

Fully payrolled taxable benefits will remove the requirement to file Forms P11D and it is also proposed that payrolling will include Class 1A NIC, removing the need for a P11D(b) to be submitted.

Confirmation Statement

Every company must provide Companies House with an annual return known as the confirmation statement; this provides information about the company at its ‘legal return date’.

A company has 14 days from its legal return date to deliver its annual return to Companies House.

You can be fined up to £5,000 and the company can ultimately be struck off (effectively, cease to exist) if it doesn’t file the confirmation statement.

Company secretarial matters

There are other matters which need to be reported to Companies House as they occur, these include:

• Appointments or resignations of directors or company secretary
• Issues or allotments of shares in the company
• Company purchase of own shares
• Reductions in share capital
• Changes to the company’s Articles of Association

Exiting the technology business

A stock market flotation involves selling a percentage of a company’s shares on a stock market. In the UK, the main options are the London Stock Exchange’s (LSE) main market, typically for large companies, and the Alternative Investment Market (AIM), often chosen by early-stage technology companies. UK technology and life science businesses are also increasingly floating on overseas markets, especially if seeking access to international funds or planning to operate in another jurisdiction.

The success of a float depends on company characteristics, market conditions, and economic factors. Investors seek strong growth prospects, and if a business lacks these or operates in an unattractive sector, a trade sale may be a better option.

Preparing to float

When preparing to float a business must ensure it is able to comply with the legal and regulatory standards required of a public limited company. It will also need to ensure that its accounting systems are able to produce the information required to prepare annual accounts and reports which comply with the generally accepted accounting principles of the market upon which the company seeks to float.

During preparation, the management team should address any potential risks for investors, including updating regulatory filings, settling outstanding penalties and fines, and resolving any existing litigation. The aim will be to present the company as an ideal, well run, investment opportunity.

Appointing professional advisors

Having the right advisors is a key element to a successful flotation. The management team may have limited experience of the demanding legal, regulatory, financial and marketing processes associated with a flotation and external help, whilst more expensive, will be invaluable for several reasons:

• An advisor who provides poor advice could seriously affect a business' ability to attract investors and float successfully
• In addition a stockbroker will be required to generate interest in the business in the investment community 
• A corporate lawyer will be responsible for the legal due diligence process and for verifying statements in the prospectus and other documents. An accountant will be needed to review and audit the company’s finances and perform financial due diligence

The flotation process

A typical flotation will take an absolute minimum of three months to complete, but usually longer (6 months is typical) and it could take as long as a year to ensure that everything is in place and the company is ready to go public.

For this reason, it is important to ensure the management team do not allow the flotation to distract them from the day-to-day business of running and growing the company.

Advantages

• Access to capital enables the development of the business
• Once shares are traded on an open market they are easier to buy and sell, which will make them more attractive to investors
• If the management team intend to make acquisitions it is easier to offer shares in the company as consideration instead of, or as an alternative to, cash
• Offering employees extra incentives, such as share options, when there is a market for the shares is more attractive than offering share options in an unlisted business
• The greater status afforded to listed companies will raise the profile of the business

Disadvantages

• Flotation may result in a lower business value, especially in an unfashionable market, and makes the company more vulnerable to market fluctuations
• Only certain businesses are suitable for floating - it requires strong growth prospects and a solid management team to attract investors
• The original management team may lose control due to the need to consider external shareholders' interests 
• The initial costs are substantial (typically in excess of £300,000)
• Ongoing costs for listing and regulatory compliance are also significant, demanding time from management
• The exit may only benefit initial investors, with the management team possibly needing to remain during a post-IPO lock-in period

EIS

EIS can be an excellent way to attract investment and offers investors tax incentives that can significantly reduce their investment risk. These incentives include:

• Income tax relief of 30% on investments
• Capital gains tax deferral on gains that are reinvested in EIS-eligible companies
• Capital gains tax exemption on disposals of EIS shares held for at least three years
• Loss relief that can be offset against income tax or capital gains tax liabilities

Not all companies qualify for EIS, but due to its competitive advantages, we recommend speaking with our tax team to determine if your business meets the eligibility criteria.

SEIS

SEIS is aimed at start-up businesses, generally available to companies with gross assets of less than £350,000 and with a trade less than three years old.

It is largely modelled on EIS but can be more flexible and the tax savings for investors can be higher.

Directors can often qualify for SEIS so long as their shareholdings do not exceed 30%.

Expand your business into the UK

The recruitment, retention and motivation of employees will be key to your business success. Employees hired in the UK will be subject to different cultural and regulatory practices from their home country. However, you may also want to bring over key staff with the corporate head office culture, or specific knowledge of the business to the UK.

The UK Government wants to encourage multinational companies to the UK. As a result, new tax legislation has been introduced which now makes the UK a very attractive location for overseas investors. The UK has one of the lowest rates of company tax (“corporation tax”) in the G7 and within Europe.

Expansion overseas

If you are a company hiring overseas employees locally or assigning UK staff abroad then let us help you to implement tax efficient remuneration and incentive packages. Whether you are sending one person to a country for the first time or you already have an established expatriate programme in place, we can provide the right services for your business.

You may not have the in-house skills to deal with the multi-jurisdiction issues which arise with assignees, or simply not have the time to manage all aspects of the assignee population.  We can take the hassle away from you and become your extended HR function in managing the expatriates.

Employment and Human Resources

With growing employment law complexity, businesses must ensure HR systems comply with key regulations. Compliance starts with the first employee, requiring legally compliant contracts, disciplinary and grievance procedures, and secure employee records, including proof of work and payroll details. 

Non-compliance risks are serious and can include fines or imprisonment. As the company grows and employs five or more staff, there will be further statutory requirements such as providing a Stakeholder pension scheme, as a minimum.

Insurance

Legally a company needs to have Employers’ Liability Insurance and Public Liability Insurance. Depending on the nature of the business, it may also be advisable to have Professional Indemnity Insurance and Key Person Insurance.

There may also be industry specific insurances required if, for example, the company is carrying out clinical trials.

Health and Safety

Employers and employees have a duty to act responsibly under the Health and Safety regulations and this extends to welfare issues like preventing stress in the work place.

Companies will need a Health & Safety Policy, and will be required to undertake various risk and Control of Substances, Hazardous to Health Regulations (COSHH) assessments depending on the nature of your business. Aspects such as first aid, fire precautions also need to considered.

Books and Records

All UK limited liability companies are required to keep records of their financial transactions and must be sufficiently detailed to accurately assess the financial position of the company at any point in time and to enable it to prepare a profit and loss account and a balance sheet. 

Most companies use an appropriate accounting system and external funders will typically require that a company produces monthly management accounts, so they can monitor actual performance against forecast. A company is required to file certain documents either with HMRC or Companies House, which we cover in the Compliance section.

Outsourcing

Our Outsourcing department have many years of experience working with Spin-outs & Start ups.

They can support you getting started by navigating you through all the requirements of a start up company, taking away the burden of maintaining compliant books and records whilst providing advice and insights so you can focus on running the business.

Initial steps

To help to manage these obligations in the early days of a company’s existence in summary it needs to:

• Set up an HR system
• Set up an accounting system
• Register the company for payroll taxes
• Depending on staff numbers set up a stakeholder pension scheme
• Register the company for VAT
• Get appropriate insurance