Does this sound familiar to you?
Are you one of the many who spent a few pounds on setting up a limited company but now find you’re being swamped by letters from HMRC and Companies House?
As an accountant in a practice specialising in start-up businesses, I 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 lifetime of legal responsibilities.
So if you’re 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 snapshot of information about the company at a point in time, eg, who are the shareholders, directors, etc.
This is often confused with the accounts but is very different.
It must be filed at Companies House along with a fee of £15 if electronic or £30 if paper.
Annual Accounts
Although Companies House only requires an abbreviated set of accounts to be filed, which look easy to prepare, HMRC does not 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 that the other will get it too.
CT 600 Corporation Tax Return
Along with the full set of accounts HMRC will require a completed CT 600.
This is not a straightforward form and, unless you have experience, it’s best left to professionals to complete.
Annual Self-Assessment
Regardless of how much they earn, each director has 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 employing staff has a number of reporting requirements, eg, P35, P14, P11D, etc.
Quarterly VAT Returns
Any business, not just companies, whose turnover exceeds the 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 to complete them 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 during its lifetime a company can cost you a significant amount of time and money to meet the plethora of filing responsibilities.
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’re getting into before you start so there are no great surprises later.
