Automatic enrolment has made workplace pensions a world of pain for many businesses, especially smaller ones who don't have the resources in house to keep up with the latest news...
What sort of business are you? If it’s your own enterprise, are you a sole trader or a limited (Ltd) company? The type of company you choose to be affects how you run it and what responsibilities you have.
As a sole trader, UK law does not view you as a separate entity to your business. What this means is that if you get into financial trouble as a sole trader, you are personally liable. So, if things go wrong and you get into debt, you could lose your personal assets, like your house or car.
Of course, from a paperwork viewpoint, being a sole trader is very straight forward, but you don’t have the limited liability and tax efficiency of a limited company.
Being a Ltd company also protects your company name, once you’ve registered it, so you get more protection than a sole trader in this respect.
However, alongside certain advantages, come obligations, some of them financial, and all of them important.
Weighing up which of the two you should choose to be means judging different things such as profitability and paperwork. If in any doubt talk to us. As a part of the business accounting services we offer in Burnley, we can give you good, sound and useful advice about your obligations as a limited company.
What are the responsibilities of a director?
If you’ve set up in business as limited company, whether from the outset, or because you’ve scaled things up, you’ll now have certain things you must do as a company director.
Your duties include acting within your power as a director; exercising reasonable care, skill and diligence, as well as independent judgement; avoiding conflicts of interest; and promoting the success of your company.
You must also not accept benefits from third parties, and you must declare any interest you have in a proposed transaction or arrangement within the company you’ve formed.
As a director, you have legal obligations. You must complete and file a Confirmation Statement every year with Companies House – this replaces the old Annual Return. On an annual basis, you must produce and maintain a register of Persons with Significant Control (PSC).
You must also let Companies House know of any changes in your company director’s details, or those of your company secretary.
If you have company shareholders, you must always act in their interests, and not in a way which might damage the company while benefiting you personally.
As well as all this, you also will have financial responsibilities as the director of a limited company.
Along with the records you must keep about the company, you must also keep accurate, detailed financial and accounting records.
HMRC may decide to check these records to see that you’re paying the right amount of tax, so it’s vital that you stay on top of them, and that you don’t miss anything out, or enter anything incorrectly.
Your company accounting records must include: any money the company has spent and received; details of all assets it owns; debts it owes, and are owed to it; stock the company owns at the end of the financial year; stock takings used to get to this figure; all goods bought and sold; and who bought and sold these goods – unless you’re a retail business.
These full business accounts should, therefore, include a balance sheet and a profit and loss account, plus accompanying notes and a director’s report.
Also include any other relevant documentation like bank statements and correspondence.
You must keep your records for six years from the end of the last company financial year they relate to. However, you may have to keep them for longer if they show a transaction covering more than one of your accounting periods, or if you’ve bought something you expect to last longer than six years.
If you’ve sent your Company Tax Return in late, or if HMRC is investigating you for compliance, then you might need to keep records for more than the six-year period.
Keeping accurate accounting records isn’t just for your, or our, benefit. Failure to do so can result in a fine of £3,000 from HMRC. Worse, you could be disqualified as a company.
If your records are lost, stolen or destroyed you must do your best to recreate them, include this information in your Company Tax Return, and inform the Corporation Tax Office as soon as possible.
Your Corporation Tax Return
As a limited company, you must file an annual Company Tax Return with HMRC. This should include a summary of your company’s financial performance during its financial year. It must include adjustments for allowable tax reliefs and tax credits and a final tax calculation, which shows how much Corporation Tax you owe.
Even if you’ve made a loss during your accounting period, or you don’t owe any Corporation Tax, you must still complete and file a Company Tax Return.
The deadline for doing this is 12 months after the end of your company’s accounting period, but while Corporation Tax is included in your Company Tax Return, you’ll find that it is in fact payable sooner than the 12 month deadline – within nine months of the end of your accounting period.
Paying Your Staff
If you want your company to pay you, or anyone else, a salary, then you must register it as an employer.
You must then ensure that you take the relevant Income Tax and National Insurance contributions from these salary payments and pay them to HMRC.
Also note that if you or anyone working for your company makes personal use of something belonging to your business you must report this as a benefit and then pay any tax due from it.
Accounting services for Ltd companies
Scaling up your business to a company brings with it challenges along the way, but we can help you meet those challenges. Some of what we’ve written here may sound complicated and a little daunting.
It needn’t be with our assistance. We can help you with your company accounts and your Corporation Tax return. We’re also here to offer you expert business advice and guidance.
You can also get practical advice directly from HMRC. It runs events, including webinars and regional seminars, aimed at new directors and companies starting up.
Get in Touch
For business support and accounting services in Burnley and Lancashire, please get in touch. We’re here to help.
Give us a call on 01282 902456, email email@example.com or visit the contact page on our website and fill in the contact form – we’ll reply as just as soon as we can.