How to Interpret Annual Company Returns: Key Metrics to Watch Out For
Annual company returns are one way for investors to understand better whom they’re investing with. This article will tell you what to look for when looking at one.
What are annual company returns?
To put it in the simplest terms possible, an annual company return is a snapshot of the non-financial information about a company. Ensure you don’t confuse it with annual company accounts because whilst the accounts are about money, the returns are mainly about the people.
Companies must submit their company return on the anniversary of the incorporation when it was officially recognised as a company. The information submitted in an annual return will be filed with companies house and made publically available.
Essentially, it’s there to ensure the government and public know who you are and who’s making all the big decisions.
What’s included in annual company returns?
When submitting an annual company return, certain information must be included. Let’s look at all this information.
- The company’s name. Most people will search for this on Companies House when they wish to learn about a company. By law, all companies need to have a name.
- The address of your headquarters. This is where your company is legally registered. By making the HQ address publicly available, people can tell whether your company is based in the UK or if you operate overseas to save on tax revenue.
- SAIL (Single Alternative Inspection Location). If your records are kept elsewhere besides your HQ, you must include this alternative location in your annual returns. The reason for this is that during an inspection, the government can access your complete records.
- Who sits on your board of directors? The company directors. HMRC needs to know their names and nationality.
- Company secretary details. If you have a company secretary, HMRC must also know their name and nationality.
Why do annual company returns matter?
The primary purpose of an annual return is to keep everything open, fair, and trackable. If someone wishes to invest with your company, they want to know what and whom they’re investing with.
Nobody wants to invest in a company that keeps too many secrets. And the annual company return is forcing companies to be more open than they perhaps want to be. It’s also an effective way of ensuring everyone pays the taxes they owe, so nothing is hidden from HMRC.
What to look for when looking at annual company returns
If you wish to invest in a company and you’re looking at a yearly company return, here are some questions to ask yourself.
“Are they based in the UK?”. Investing in a UK-based company will benefit the local economy far more than investing in someone from abroad. Plus, the tax rules for return on investments differ for overseas companies.
“Who are the directors?”. Thanks to Google and LinkedIn, you can learn more about the board of directors. Look at their track record, and decide whether you can trust them with your money.
“Where are they based? Does it make sense?”. For example, if a company that sells products in Portsmouth is registered in Newcastle, this might raise a few eyebrows.