Tax & accounting glossary
Plain-English definitions of the UK tax and accounting terms you'll meet in TaxOptimiser.
Abridged accounts
Abridged accounts are a shortened version of a small company's accounts in which some balance sheet and profit and loss lines are combined. They need the agreement of all the members, and the option to file them ends on 1 April 2028.
Accounting reference date (ARD)
The accounting reference date is the day and month on which a company's financial year ends each year. Companies House uses it to set the deadline for filing the company's annual accounts.
Assets
Assets are resources owned or controlled by a business or individual that have economic value and are expected to provide future benefit, such as cash, property, equipment, stock or receivables. For accounting purposes, they are typically classified on the balance sheet as either current assets (held short-term) or non-current/fixed assets (held long-term).
Audit exemption
Audit exemption lets a qualifying company, usually a small company, a dormant company or a guaranteed subsidiary, file accounts without having them audited. The directors confirm the exemption in a statement on the balance sheet.
Balance Sheet
A balance sheet is a financial statement that shows a business's assets, liabilities and equity at a specific point in time, providing a snapshot of its financial position. In the UK, it forms part of the statutory accounts filed with Companies House and HMRC.
Company authentication code
A company authentication code is a six-character code that Companies House issues to each company. It is needed to file information online or through software, including the annual accounts.
Dormant company
A dormant company, for Companies House purposes, is one with no significant accounting transactions during its financial year. It still has to file annual accounts and a confirmation statement, but it can file simpler dormant accounts.
Filleted accounts
Filleted accounts are the version of a small company's accounts filed at Companies House without the profit and loss account and directors' report. The members still receive the full accounts, and HMRC gets them with the Company Tax Return.
First accounts
A company's first accounts cover the period from incorporation to its first accounting reference date. A private company must file them within 21 months of incorporation, and a public company within 18 months.
iXBRL package accounts
iXBRL package accounts are a set of accounts and related documents delivered to Companies House together as a ZIP file, with the accounts tagged in iXBRL by software.
Late filing penalty
A late filing penalty is the automatic civil penalty Companies House charges a company whose accounts arrive after the deadline. For a private company it ranges from £150 to £1,500 and is doubled if the accounts were also late the year before.
Micro-entity
A micro-entity is the smallest size of UK company for accounts purposes: one that meets at least two of turnover up to £1 million, a balance sheet total up to £500,000 and no more than 10 employees. Micro-entities can prepare simpler accounts under FRS 105.
Small company
A small company is one that meets at least two of turnover up to £15 million, a balance sheet total up to £7.5 million and no more than 50 employees. Small companies can use the small companies regime, including simpler accounts and exemption from audit.
Strategic report
A strategic report is a narrative report in a company's annual accounts that reviews its business, principal risks and performance. Medium-sized and large companies must prepare one; small companies are exempt.
Trial Balance
A trial balance is a bookkeeping report that lists the closing debit and credit balances of every account in the general ledger at a given date, with the two columns expected to total to the same figure. It is used to check the arithmetical accuracy of the double-entry records before preparing the financial statements.
VAT
VAT (Value Added Tax) is a consumption tax charged on most goods and services supplied in the UK, currently at a standard rate of 20%, with reduced and zero rates applying to certain items. Businesses with taxable turnover above the VAT registration threshold must register with HMRC, charge VAT on their sales, and submit regular VAT returns.
VAT exempt
VAT exempt refers to goods and services on which no VAT is charged and for which the supplier cannot reclaim VAT incurred on related purchases. Businesses making only exempt supplies generally cannot register for VAT.
VAT Return
A VAT Return is a form submitted to HMRC, usually every three months, showing the VAT a business has charged on sales and paid on purchases during that period. It is used to calculate whether the business owes VAT to HMRC or is due a refund.
VAT Reverse Charge
The VAT reverse charge is a mechanism where the customer, rather than the supplier, accounts for the VAT on a transaction directly to HMRC. It commonly applies to certain construction services under the Construction Industry Scheme and to some cross-border supplies of goods and services.