LIMITED COMPANY GUIDE, Summaries of Accounting

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Operating as a limited company Incorporating a limited company Completing your bookkeeping Claiming business expenses Corporation tax Confirmation statement Registered address Completing your accounts Taking money from your company Next steps

CONTENTS

OPERATING AS A LIMITED

COMPANY

Small businesses generally choose to trade through a limited company as they can be much more tax efficient compared with trading as a sole trader or partnership. It does, however, need to be structured in the right way to take advantage of the savings available. A limited company is a completely separate entity from its owners. Everything from the bank account to ownership of assets and any involvement in tenders or contracts is purely company business and separate from the interests of the company's owners or shareholders. In comparison, a sole trader and their business are treated as a single entity for tax and administrative purposes.

INCORPORATING A

LIMITED COMPANY

Incorporating (forming) a limited company is relatively straight forward. There are four KEY steps: The director is the person that will be responsible for running the company, along with the shareholders.

3. Decide who the shareholder(s) will be. The shareholder(s) will be the person(s) who will own the company. The directors and shareholders are often the same people in small limited companies and can be just one person. 4. Register with Companies House Once you have chosen your director, you - or a chosen third party will need to register your company with Companies House. Blue Rocket can do this for you if you wish. 2. Decide who the director(s) will be. Draft a list of potential company names and make sure yours is available. 1. Choose a name.

COMPLETING YOUR

BOOKKEEPING

Bookkeeping is the recording of your day-to-day transactions in a system, such as a spreadsheet or accounting software. These transactions are then used as a basis for completing your accounts or tax returns. No matter how big or small your business is you will need to ensure you keep accurate bookkeeping records. This is so you can manage your finances and get a view of youreveryday expenses. HMRC expect you to keep your bookkeeping records for at least 6 years

CLOUD BASED

ACCOUNTING SOFTWARE

We use several cloud accounting platforms at Blue Rocket. All of them will help you to save time, become more organised and to have a better insight into your finances. They are easy to understand without using confusing jargon or complicated processes. You can use any of the platforms to invoice, produce VAT reports and everything else in between so you can keep your business running smoothly. If would like find out more, then give us a call on 01322 555 442 and we’ll get you set up straight away. Our extensive bookkeeping service includes everything you need to accurately document your business transactions

CLAIMING YOUR

BUSINESS EXPENSES

Different types of businesses will have different types of expenditure. But as a general rule, tha vast amount of business expenditure is allowable, even expenses you have incurred personally for business purposes. We recommend opening a company bank account to keep your business and personal transactions separate. Motor expenses Staff costs and wages Use of home as an office (rent, rates & utility bills) Materials or goods you sell Telephone and internet Advertising and internet costs Business insurances Repairs and renewals Work clothing Travel and subsistence Capital expenditure (equipment, furniture etc.) Entertaining costs The most common business expenses are:

WHAT IS A DIVIDEND?

A dividend is a payment from the company's profits (after tax) to its shareholder(s). To declare a dividend, a dividend voucher and minutes must be produced. Once the paperwork is in place, the money can be transferred from the company bank account to the personal bank accounts of the shareholders.

CORPORATION TAX

You must pay corporation tax on profits from doing business as a limited company. Corporation tax for limited companies is currently set at 19% (2021). This means any profits made during your financial year will be taxed at 19%*. Paying your tax bill Your corporation tax is due no later than nine months and one day after your financial year end. Faster payment (bank transfer direct to HMRC) Direct debit Billpay (pay online with debit or credit card) Bank giro Post Office Failure to pay your corporation tax on time could result in surcharges and interest being charged to the company. You can pay your corporation tax using the following methods: For further information about paying your corporation tax, contact your local tax office. *This is due to increase to 25% with effect from 1 April 2023.

WHAT IS A CONFIRMATION

STATEMENT?

You need to check that the information Companies House has about your company is correct every year. This is called a confirmation statement (previously an annual return). The confirmation statement notifies Companies House and the public as to the current company appointments, such as directors, shareholders and the company's registered office address.

COMPLETING YOUR

ACCOUNTS

If we are completing your accounts and accompanying tax returns we follow this simple three step process: We send you a reminder We compile your accounts We submit your accounts To let you know when your accounts are due and ask for your bookkeeping records. After your accounts are completed, they'll be double checked by a Senior Accountant. After your approval, we'll submit your accounts to HMRC.

We can take care of everything that HMRC requires and inform you of the corporation tax payment required in plenty of time

DEADLINES AND PENALTIES

FOR LATE SUBMISSIONS

Your accounts to Companies House are due no later than nine months after your financial year end. Failure to submit the accounts on time will result in a £150 penalty. This will contiinue to increase until they have been filed. Your accounts and corporation tax return are due to HMRC no later than twelve months after your financial year end. Failure to submit your tax return on time will result in a £100 penalty. This will continue to increase over time.

WHEN DO I NEED TO

REGISTER FOR VAT?

You must register for VAT when your turnover exceeds £85,000 (2020/2021) in any given twelve months. However, if your customers are also VAT registered it could be beneficial to register for VAT voluntarily before you reach this threshold.

If you’re a Blue Rocket client you can benefit from our Asteroid Fee Protection booster, giving you peace of mind that should you ever be investigated, you will have the highest level of representation from our team without worrying about escalating fees. Every year, HMRC select tax returns at random for investigation, they may also select returns because the submitted figures don't look right. It is unlikely that you would be selected, but if you are, you would be asked to show your paperwork to backup the figures submitted to HMRC. Undergoing a tax enquiry from HMRC can be incredibly stressful. It can also be hugely costly if you don’t have a fee protection agreement in place with your accountant, even if HMRC finds your tax affairs are in order.

WHAT IS A HMRC TAX

INVESTIGATION?