Setting up and Running a Limited Company 13 11 15

Setting up and Running
a Limited Company
A brief introduction and explanation to some of the
legal and financial matters which need to be considered
© T Bathgate & C Lucas Broadthunder Ltd All rights reserved

1. Company Set Up
• You form a limited company at Companies House
• Key details for the formation:
• Name – a company name (which is not already being used)
• Directors – who will they be - at least one
• Company Secretary – small companies no longer need to appoint a
Company Secretary (but you can if you want)
• Registered Office – is the legal address of your company
• Shares: the allocation of shares – the owners and how they are split
• Once set up check the details to ensure it is formed as you wanted
13/11/2015 2© T Bathgate & C Lucas Broadthunder Ltd All rights reserved

2. Bank Account
• One of the first actions after the company has been formed
is to open a company bank account
• There are plenty of banks keen to have you open it with
them
• Remember this is the COMPANY account and not your
private account
• To open the Bank Account you will need to take the
Certificate of Incorporation and a copy of your share
certificate.

3. Company Accounts
1. The company is allocated an accounting reference date by
Companies House
2. This is usually one year after the end of the month the company
was formed in. So if the company was formed on 5 November
2015 the accounting reference date would be 30 November
with the first accounts being at 30 November 2016.
3. You can change your reference date once every 5 years if you
wish. There are times when this can be done and it may be
possible to change more than once if certain circumstances
exist.
4. The accounts must be filed at Companies House within 9
months of the accounts year end. This is however different in
the first year when it is 9 months after the company was
incorporated.
5. If accounts are not filed on time there are severe financial
penalties.

4. PAYE/NIC
• If you intend to pay salaries then you will need to set up a Pay As You
Earn (PAYE) Scheme with HM Revenue & Customs (HMRC). You do this
on line at: https://www.gov.uk/paye-for-employers/paye-and-payroll
• HMRC will give your company a reference number and the company will
be required to deduct tax and National Insurance from any salaries paid
to directors and employees if appropriate.
• Responsibilities:
• Deduct and pay to HMRC Income Tax and NIC from salary payments
• File monthly PAYE returns in Real Time (RTI) to HMRC
• Report benefits and expenses paid to directors and employees on
forms P11d after the end of the tax year
• Getting this right is important as there are various penalties which
can be incurred for failure to get it right

Basic facts for 2015/2016
Income Tax Rates and Personal Allowances
Your tax-free Personal Allowance is £10,600 This is the amount you can earn before you pay tax
Income Tax Rates - Taxable Income above your Personal Allowance
Basic rate 20% £0 to £31,785 You start paying this rate on income over £10,600
Higher rate 40% £31,786 to £150,000 You start paying this rate on income over £42,385
Additional rate 45% Over £150,000
Example: £
Taxable Income 35,000
Personal Allowance 10,600
Basic Rate at 20% 24,400
Tax Due 4,880

Basic facts for 2015/2016
1. There are different types of National Insurance (known as ‘classes’.
The type you pay depends on your employment status and how much
you earn, and whether you have any gaps in your National Insurance
record.
2. If you are employed you pay Class 1 NIC. If your pay is £155 to £815
per week (£672 to £3,532 per month) Class 1 rate is 12%. If your pay
is over £815 per week (£3,532 per month) it is 2%.
3. The employer (your company) will have to pay NIC at the rate of
13.8% on any salary above £676 per month.

5. VAT
• VAT is a tax normally added to the value of your sales and currently the rate is set
at 20%. So, if the invoice for your services is £200 then you would add £40 (£200
X 20%), making the total invoice £240.
• You must register for VAT if the annual turnover of the company will exceed
£79,000. You can register voluntarily even if your turnover has not reached this
threshold.
• There are several VAT responsibilities you have as a director. They are:
a) completing a VAT return on time which must be done electronically and you
can pay by direct debit; (It is usual to prepare returns quarterly but you can do
monthly and annual)
b) the return is due approximately 5 weeks following the return period.
• Questions to ask:
• Should I be on a cash or accruals basis?
• Should I be on a flat rate scheme and if so what %?

6. Corporation Tax
• After the company has been formed at Companies House, HMRC will
issue a form - ‘Corporation Tax – New Company Details’ – sent to your
registered office.
• By completing this form HMRC will register your company for CT – this is
tax payable on company profits and be issued a Unique Tax Reference
(UTR)
• CT is charged on profits at 20% for small companies.
• There are a few CT responsibilities for directors:
(a)complete a CT Return every year – filed with HMRC together with a
set of annual accounts, within 9 months of the period end date; (b) Pay
any CT due – this is payable 9 months after the period end date. Penalties
can be incurred for failure to get this right.

7. Insurance
• Public Liability Insurance – to insure you against injury or death to third
parties and damage to third party property as a result of your actions.
• Employer Liability Insurance – this covers the employer against claims by
an employee for injury etc. This is not required if you are the only
employee and you own at least 50% of the shares.
• Professional Indemnity Insurance – to insure you against any claims
made against you, for example, if your client suffers financial loss as a
result of your mistake or negligence.

8. Appointing an Accountant
• Hudddart’s are Chartered Accountants - this guarantees certain
qualifications and standards and being members of the ICAEW (Institute of
Chartered Accountants for England and Wales)
• We provide the following services:
• Accounts
• Payroll & VAT
• Book keeping
• Tax
• Consultancy and Funding advice
• Business Mentoring
• Please visit our website for further information or phone for an
appointment
• www.jeffreyahuddart.co.uk

9. Invoicing
• In order to receive payment for your services you will need to issue an
invoice. Legally an invoice must contain the following:
• Company Name, address and registration number
• VAT number (if registered)
• Invoice date
• Invoice number
• Itemised breakdown

10. Expenses
• What expenses can I claim?
• All expenses must be ‘wholly and exclusively’ for the benefit of the
business
• Typical expenses include:
• Purchase of materials or good for re-sale
• Property rent and running costs
• Advertising
• Insurance
• Business entertaining (not allowable for tax though)
• Subscriptions to professional bodies
• Bank charges

11. Salary
• Level of salary
• A decision you will need to take
• Can be influenced by a number of factors
• Factors:
• Capability of the business
• Income tax and corporation tax rates
• Salary and/or dividends
• Pensions

12. Dividends
• What are they?
• They are a portion of post tax profits paid to the
shareholders (the owners of a Limited Company)
• They are always declared and paid net of a notional tax
rate of 10%
• If the recipient of the dividend is not a higher rate
tax payer then no further tax will be due.
• Higher rate tax payers will be liable for an
additional charge on any dividends that exceed the
higher rate threshold.
• This changes on 31 March 2016

13. IR 35
• What is this?
• It was introduced in April 2000 to combat what HMRC called
‘disguised employment’.
• It is to increase the tax paid by people who set up their own
company instead of working as a normal employee.
• Where a company provides the services of a number of staff to a client
(directly or via an agency) and the terms are such that without the
company the individual would be an employee of that client, then the
IR35 is triggered.

14. Tax Returns
• As a director HMRC will usually expect you to complete a personal Tax
Return each year
• The Tax Return will include details of all your income such as salaries,
interest, dividends. Allowable deductions such as pension and charity
contributions are also declared.
• It is normally due with HMRC by 31st January after the end of the tax
year.
• Requests to complete a tax return are normally issued by HMRC in April
each year. If you have not been issued with one you should contact
HMRC to request one.

15. Dates to be aware of
ITEM DATES AND DEADLINES TO BE AWARE OF
Companies House Abbreviated Annual Accounts to be filed at Companies House within 9 months of the year end. (Earlier dates apply to the first year).
Annual Return (AR01) This is prepared at the anniversary of the company’s incorporation, it is then due 28 days after this date.
HMRC Full Annual Accounts & Corporation Tax Return (CT600) to be filed on line with HMRC within 12 months of the year end.
Corporation Tax Payment of Corporation Tax is due 9 months after the year end
VAT Returns and Payment These are due at the end of the month following each quarter. For example:
Q Ending 31 March will be due by 7th May
Q Ending 30 June will be due by 7th August
Q Ending 30 Sept will be due by 7th November
Q Ending 31 Dec will by due by 7th February
PAYE payment submissions These are due to HMRC on or before each employee’s payment date
P11d & P11d(b) These are due after the end of each tax year. The should reach HMRC by 6th July after the end of the tax year.
PAYE/NIC Deductions from salary should by paid no later than the 22nd of the end of the month/quarter, if paying electronically.
Assuming the company is eligible for quarterly payments they will be due:
Q Ending 5th April payment will be due by 22nd April
Q Ending 5th July payment will be due by 22nd July
Q Ending 5th Oct payment will be due by 22nd October
Q Ending 5th Jan payment will be due by 22nd January
If you do not pay electronically payments are due 3 days earlier
Class 1A NIC This relates to National Insurance on certain benefits such as company cars.
It this applies then payment is due by 22nd July following the end of the tax year.

16. Glossary – forms and codes
FORM PURPOSE
AA01 Companies House form to change the year end of the company
AD01 Companies House form to change the registered office of a company
AP01 Companies House form to appoint a new director
AP03 Companies House form to appoint a new company secretary
TM01 Companies House form to remove a director
TM02 Companies House form to remove a company secretary
CH01 Companies House form to change any details of a serving director
CH03 Companies House ofrm to change any details of a serving company secretary
AR01 Companies House Annual Return
64-8 Form to authorise HM Revenue & Customs to provide company details to your accountant
DS01 Companies House form to strike a company off the register
SH01 Companies Houe form to issue additional shares in the company
CT41 G New Company Enquiry form issued by HMRC soon after the company is formed.
This informs HMRC who the directors are. Penalties may be charged for late submission.
CT600 Company's Corporation Tax Return - submitted annually. It is due within 12 months of the year end.
P11d Annual Statement of benefits and expenses paid to each director and employees.
P11d(b) Annual company declaration that P11d's have been filed.
P45 Leaving statement of payments and tax deducted from an employee
P46 Notice to complete if you do not have a P45
P60 Annual Statement for each employee provided to the employee by the employer
VAT1 VAT Registration application form
VAT7 VAT Deregistration Form
VAT100 Quarterly VAT Return
VAT101 VAT EC Sales List - for reporting sales to EU Customers
VAT600 VAT Flat Rate application form
SA1 HMRC form to register for self-assessment
SA100 Self Assessment Tax Return

17. The 10 point checklist
1. Form the company – check the formation documents
2. Open a bank account
3. Register a PAYE scheme with HMRC
4. Register for VAT if necessary
5. Apply to join the VAT Flat Rate Scheme if appropriate and applicable
6. Register for Corporation Tax – will be done for you
7. Purchase the relevant insurance policies
8. Create your invoice
9. Put the key deadlines in your diary
10. Choose the right accountant and get them to help you carry out items 1-6,
produce your Annual Company Accounts and complete the form 64-8
(authorising the accountant to act as your agent)

Setting up and Running a Limited Company 13 11 15

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