Setting Up a Limited Company, it sounded so easy but now I am bombarded with letters and fines!
Does this sound familiar?
Are you one of the many who spent a few pounds on setting up a Limited Company but now find you are being swamped by letters from HMRC and Companies House.
As accountants in a practice specialising in start-up businesses, we often hear from people who are late in filing their accounts or annual return but just have no idea what any of it means or where to start.
Setting up the company was easy and probably took less than 24 hours but it means a life time of legal responsibilities.
So if you are in this position or are about to set up a Company, just stop for a moment to read this and it will become clear as to what you have got yourself into.
For a limited company you will need to complete the following:-
An Annual Return
This is a snap shot of information about the Company at a point in time eg. who are the shareholders, directors etc. This if often confused with the accounts but is very different.
This must be filed at Companies House along with a fee of £15 if electronic or £30 if paper.
Annual Accounts
Although Companies House only require an abbreviated set of accounts to be filed, which look easy to prepare, HMRC do require a full set of accounts including a detailed profit and loss account and directors report.
Companies House and HMRC are very different government departments and do not work together. So do not assume that just because you have filed some with one of them, the other gets it as well.
CT 600 Corporation Tax Return
Along with the full set of accounts, HMRC will require a CT 600 to be completed.
This is not a straight forward form and, unless you have experience, it is best left to professionals to complete.
Annual Self Assessment
Regardless of how much they earn, each director of the Company may have to complete a self assessment which should show all of their income from every source, not just from the company.
Annual Employer Returns
Any business which employs staff has a number of reporting requirements eg. P35, P14, P11D etc.
Quarterly VAT Returns
Any business, not just companies, whose turnover exceeds VAT threshold in the previous 12 months has to register and account for VAT. The biggest mistake made here is assuming that the need to register relates to the accounting year rather than the previous 12 months from the current date.
Registering for VAT means the completion of a quarterly VAT return. This is due at the end of the month following the quarter end date. So it is essential that the accounts are kept up to date so that this can be completed on time.
Late filing of any of the above returns will result in a fine, penalties and interest. In the case of your accounts you can be fined by both Companies House and HMRC. The fines start at £100 and increase from there up to the possibility of a criminal conviction for significant late filing of documents.
It doesn't end there of course. Even when you have stopped trading you have to file dormant accounts each year or if you decide to close the company down there is even a long winded process to follow for that.
So in its life time a Company can cost you a significant amount of time and money to meet the plethora of filing responsibilities.
Yes of course this cost is tax allowable, except for the fines and in many cases there are tax advantages to operating as a Limited Company.
However, just make sure you know what you are getting into before you start so there are no great surprises later.
CheapAccounting.co.uk