Registering your business in the UK: when you start a business in the United Kingdom, you must choose a suitable legal structure. Most businesses fall into one of three categories: sole traders registration, limited company formation, limited liability partnerships establishments. Once you have chosen a structure, you will need to register your business. If you have chosen to become a sole trader, you will need to register for self-assessment tax, which means that you must calculate your own tax. As a sole trader, you will be classed as self-employed, which means that you will be working for yourself.
Registering a small business involves a number of important steps if you want to get things right first time. There will always be an element of trial and error in starting up a business; however, we hope this overview will guide you through the initial steps, based on the experiences of the Coddan Ltd team and our contributors.
If you have chosen to set up a private limited company, you will need to appoint people to run your company (these individuals will be known as directors) and register your business. If you have chosen to set up a business partnership, you will be running your business as an individual. However, all of the partners will share the responsibility for the business. To set up a partnership, you will need to register for self-assessment with HMRC, run your business as an individual yet share the profits between your partners. As a limited liability partnership, you will not be responsible for your business' losses.
Receiving help with starting a business: starting business in the UK can be a challenge, particularly if you cannot decide on the best legal structure for your business. At Coddan, we will be pleased to provide you with expert advice on choosing a legal structure and registering your new business. Whether you wish to register as a sole trader, limited company or limited liability partnership, we will be able to help you.
If you're looking to set up a sole trader company in the UK, this is an exciting time for you as you embark on your new business structure. However, there is a lot that goes on behind the scenes of setting up your sole trader company, and you can be forgiven for feeling a bit over whelmed. Here at Coddan, we are experts at limited companies formation, and can ensure you complete all the necessary requirements efficiently, quickly and cost effective. Whether it's help with the necessary corporate documents, providing a registered office address, or opening a company bank account, we can provide everything you need to start your business in UK. With a variety of packages to suit your needs, see how we can help you with starting up a business in the UK today. If you need an assistance with a business start-up in UK, you can also speak to our business advisors between 9.30am-6.00pm Monday to Friday by telephoning + (0) 207.935.5171 or + (0) 330.808.0089 (national rates).
You are not alone if the thought of running your own business has crossed your mind. Even if your vision of a small business differs from your neighbours', you probably dream have being your own boss and of providing a needed service or creating a cool new product.
However, your very first small-business decision may be to admit that you are not ready for this career - at least not yet. If you are straddling the fence, Coddan Ltd will uncover whether this career works for you. You will also gain insight into getting your personal finances in order before exposing yourself to the risk of a new business, and discover how to draw a roadmap to reach your career destination.
Our experience with thousands of companies has shown us that many new business owners want the fastest and easiest route to their new limited company with no loose ends. This is exactly what you will get if you choose to incorporate a company with Coddan.
Coddan is a professional company, which has been servicing the international community with a diverse range of top quality UK, EU, USA and offshore company formation services for many years. Coddan incorporates in the UK, USA, and various other offshore locations. We provide business support service (e.g. private foundations, corporate bank accounts, mail forwarding, business, and tax planning) for companies based in various locations worldwide.
We do not hide any fees from our customers because price transparency is essential to us. Our service fees and business filings fees are provided to our customers upfront. Our online filing makes the ordering and companies incorporation process easy and convenient, allowing you can concentrate on other areas of your business start-up procedure.
Our phones are answered during business hours by specialists, not by an answering machine. We appreciate the value of your time and understand that a person cannot be replaced by technology. This is especially true when it comes to making important business decisions.
Coddan is an industry leader in online business incorporation, document processing and small business start-up services. Our passion for client service is matched only by our desire to take on new work. If you feel we can be of assistance to you, we would be pleased to examine your needs and find the best solution for you. We offer a free initial consultation to enable you to explain your needs and to give us an opportunity to show you how we can be of assistance.
If an applicant subsequently joins the tailor-made premier service, the cost of the consultation is included in the price of the package. If you prefer not to complete our online questionnaire, you can submit your inquiry by e-mail to email@example.com, with the subject: "Online Inquiry" or by post: Attn: Coddan Ltd, Corporate Division, 120 Baker Street, London, W1U 6TU, or by fax: + 44 (0) 207.681.3318.
Upon receiving the information, you will be contacted by one of the business consultant to discuss your situation. Coddan Ltd offers assistance and resources for those running or starting a business in England, Scotland, Northern Ireland or Republic of Ireland. Coddan Ltd also offers business-planning, companies incorporation, accounting and consulting services in USA and offshore countries.
Start a business in London, Liverpool or Manchester, business planning in service for UK and non-UK customers: setting up and running a business is a time consuming task - you need to be dedicated and focused and able to structure your time in order to be successful. The rewards of starting up your own business can be great, but think carefully if you have the attributes and right sort of personality to cope with going it alone.
Setting up a small business involves a number of important steps if you want to get things right first time. There will always be an element of trial and error in starting up a business; however, we hope this overview will guide you through the initial steps, based on the experiences of the Coddan Ltd team and our contributors.
There were 2.08 million enterprises registered for VAT and/or PAYE in March 2011, compared with 2.10 million in March 2010, a fall of nearly 20,000 (0.9 per cent). Between March 2010 and March 2011 there was a reduction in the number of sole proprietors and partnerships, while corporate businesses increased by 0.6 per cent:
a) Corporate businesses (companies and public corporations) represented 59.8 per cent of total enterprises, up 0.9 percentage points from the 58.9 per cent seen in 2010;
b) Sole proprietors represented 23.3 per cent of total enterprises, down 0.5 percentage points from 23.8 per cent in 2010;
c) Partnerships represented 12.7 per cent of total enterprises, also down 0.5 percentage points from 13.2 per cent in 2010;
d) General government and non-profit making bodies represented 4.2 per cent of total enterprises, compared with 4.1 per cent in 2010.
The professional, scientific and technical sector accounted for the largest number of businesses with 15.9 per cent of all enterprises registered. This was followed by construction with 12.6 per cent of all enterprises registered, and retail with 9.0 per cent.
The distribution of enterprises by employment size band shows that 88.8 per cent had an employment of less than 10, and 98.0 per cent had less than 50 employments. Large enterprises, those with 250 or greater employment, accounted for only 0.4 per cent of all enterprises. Analysis by age of business shows that 14.7 per cent of businesses were under two years old, and 27.7 per cent were under four years old. A further 44.5 per cent of businesses were 10 or more years old.
More and more people are closing down their traditional partnerships and sole proprietors businesses, and starting a new or the same business as private companies limited by shares. However, which business structure is the best for you? You should think carefully about which structure suits your particular circumstances before making a decision. Choosing the wrong structure could expose you to unnecessary costs and risks, while failure to address certain practical issues may result in you falling out with your business partners or associates.
Having said that, the status of sole trader suits many professions where starting up does not require major investment, and where a skill - such as carpentry, bricklaying or freelance services - is just as important as business acumen. It will not stop you from employing people when you start to get busy, but it will allow you to keep a tight grip on your business and to run it as you wish.
Today, there are several business entity options available for entrepreneurs. Like anything else, each of them has advantages and drawbacks:
Starting business as a self employed: most people who start in business do so as sole traders. They work on their own. They alone receive the income and are liable for any debts. However, with that comes danger.
You are liable for any debts that you incur, because the business is, quite simply, you. The financial costs of starting up are minimised by working alone from home. It can be a lonely life but, instead of colleagues, you have customers.
Business people who work in the same town often join organisations such as the British Chambers of Commerce or networking groups such as Business Network International where they meet other people who are in a very similar situation to themselves. Talking your problems over with other people in business, provided that they are not competitors, can help.
Being a sole trader is the simplest way to get started in business (although not necessarily the best, you need to get professional advice before taking the plunge). Once you have informed the government agencies of your intentions to go self-employed, you can start trading right away (subject to any specific licences you might require in your line of work).
As a sole trader, you can quickly adapt to changes in your business with minimal bureaucratic changes required and you have complete control over your business and accounting affairs. However, a sole trader is also ultimately responsible for any liabilities should anything go wrong. If you start working for yourself, you must register with the Inland Revenue as self-employed, even if you already send in a tax return. You should register the moment you start out as a sole trader; otherwise, you could incur a financial penalty. There are some exceptions and special rules for particular industries, like the construction industry.
When you start working for yourself, you will need to register as self-employed with the Inland Revenue. Once you registered as self-employed, you will be a self-assessment taxpayer. You can trade under your own name, e.g. John Doe, or use another business name, e.g. AAA Business Marketing (do not forget to check that no one else is using the name).
Even as a sole trader you should have a separate bank account. This will make it easier for you to do your tax return, and keep track of how much money your business actually has.
Keep accurate accountancy records: essentially, your business income is counted alongside your existing personal income, so the accounting side of your business will be very straightforward. As the name suggests, you will be personally liable for any debts you incur in the running of your business, which you would not be under the limited company route. In terms of accounting, you will need to submit an annual self assessment form to the Inland Revenue and keep accurate and up-to-date records of all business transactions and accounts.
You will also be pay income tax on all profits and pay national insurance contributions on those profits. Losses can be offset against tax on other income. In the April after your business starts, the Inland Revenue will send you a self-assessment tax return to fill in. The Revenue will also use the return to assess any profit-related (Class 4) NI contributions you may need to pay.
Income tax is operated under a "self assessment" basis which means that you tell the Inland Revenue what your taxable profit is and they reserve the right (normally within one year of the last date for submitting the Return) to make inquiries. This could involve asking for all your accounting records and supporting vouchers, bank statements (business and private) etc. You are expected therefore to keep sufficient records to support your Tax Return.
Your income tax is calculated and due by 31 January following the end of the tax year. By then, you will already have made payments on account half-yearly by 31 January and 31 July. These will have been based on your profit for the preceding tax year. The actual sum due is paid after deducting the payments on account already made. Sometimes your payments on account will be too much in which case you will receive interest called a supplement and a refund.
To be able to fill out a self-assessment tax return correctly, you need to keep a clear record of all your sales and purchases. This includes all invoices you have issued and received, plus any receipts. You will also need to keep a record of money you have personally taken out of the business, such as when you withdraw profits, and of course business bank statements.
All of this paperwork will help you work out what profit your business is making. It can be as simple as revenue in, minus expenses out… although some purchases may not be counted as genuine business expenses. Whatever is left is your profit and what you will be taxed on. There are some allowances you can use to reduce the tax impact such as capital allowances on any equipment you buy.
If you're self-employed you must keep business records such as your accounts, evidence of tax that's been paid and other records relating to your income and outgoings. You will need these to help you complete your tax return or to answer any questions from HM Revenue & Customs (HMRC) about a return you've completed.
You'll need to keep your business records separate from and for longer than your personal records. Most businesses find that it helps to have a separate business bank account. You must keep records so that you can fill in the return fully and accurately, your basic business records must include:
a) The records of all your sales and takings;
b) The records of all your purchases and expenses.
You or your accountant use these records to create a profit and loss account - which shows the sales income you've received and the expenses you've paid, and what profit/loss you've actually made.
Self assessment deadlines: there are four key deadlines for sending in your tax return and paying any tax due:
31 October - this is the deadline for sending in the majority of paper tax returns;
31 January - the deadline for sending in your tax return online, and some paper tax returns where the return cannot be filed online;
31 January - this is the payment deadline for what you owe for the previous tax year, and if payments towards the current year's tax bill (called 'payments on account') are due;
31 July - the deadline for your second payment on account - if one is due.
Penalties and surcharges may apply if you miss these deadlines.
The total control of business by the owner & the easiest & least expensive form of ownership to organise, plus fewer statutory controls. The lower National Insurance costs, tax payable is income tax paid in two instalments, plus the profit can be withdrawn at any time without PAYE problems. As the owner, all profit belongs to the sole trader, & your business affairs are private - competitors cannot see what you are earning, so will know less about how the business works & how it succeeds.
The weak structure, the sole-trader is liable for all debts of the business. You are personally responsible for keeping your financial records in order and filling in a tax assessment. May be at a disadvantage in raising funds and are often limited to using funds from personal savings or consumer loans, fewer tax reliefs and benefits are available. There are certain businesses that will not use sole-traders, particularly if you are a contractor.
This is not a suitable way to trade if you want to hire employees or your business grows so big that there's a long way to fall if things go wrong. Remember, you are liable for everything to do with the business.
Being a sole trader will suit a large number of small business people, however it is not always the best route which is why we suggest discussing your choices with an accountant or other adviser. The limited company route limits the personal liability of its directors if something goes wrong, whereas the sole trader is ultimately personally liable for any losses the business makes, of if you are forced into bankruptcy.
In addition, in some areas of business, having a limited company set-up will enhance prestige and provide a more professional appearance in certain industries. Before you start trading, you will have to decide under which structure you intend to trade. This will be dependent on the type of business you are running and how you intend to develop in the future.
Everyone starting out on their own needs to. It is quick, it is painless and it can definitely save you time and money. You must do this as soon as you start or within the first three months, even if you already use a self assessment tax return. There are penalties for not registering, so fill in the form at the back of this leaflet and send it to us right away.
Do you need an accountant? Yes. An accountant will prepare your accounts in a way that is acceptable to the taxman, and will ensure that you are charged the right amount of tax. However, do not wait until the end of your first year of trading before finding one. An accountant can give you valuable help in setting up your bookkeeping system; if you keep your records in the form suggested by your accountant it would make his job in preparing your accounts easier and therefore cheaper. He will also be able to help you to prepare budgets and cash flow forecasts, which your bank manager will want to see.
Coddan Ltd assists self-employed persons with the self-assessment tax return they may or may not be VAT registered and may even have employees who will need to have the correct taxes and contributions calculated and statutory returns made to the HM Revenue & Customs.
You could set up in business with a colleague or friend. Perhaps you each have different skills to bring to the enterprise. One may be a good sales person and negotiator while another has the ability to provide a service, like mending guitars, writing websites, compiling accounts, analysing markets or sculpting. When you go into business with someone else, this is usually known as a 'partnership'.
Everyone might own an equal share or some may have a larger proportion of the business than others. In a partnership, you are liable for the debts of the business in proportion to how much of it is yours and your income may be of a similar proportion.
Unlike other business formats, partnerships (and sole traders) can start trading straight away, although certain types of businesses may need a licence to trade. If trading under a name other than that of the owners, must display names of owners and an address, for each, at which documents can be served.
Behind sole-traders, a partnership is the second most popular type of business and is more commonly associated with professional services such as accountants, solicitors and doctors. It is also common in partnerships for each partner to specialise in a specific area of the business. For example, in an accountancy service, one partner may specialise in bookkeeping, another partner may specialise in financial advice, and so on.
You have to be aware that because any decisions and actions are dependent on the other partners agreeing, certain conflicts may arise from time to time. Such conflicts have led to partnerships failing and so it is important that some control can be maintained by compiling a 'partnership agreement' prior to starting the business. This agreement will be outlined later in the article.
Register as the General Partnership
The general partnership, which is the scenario outlined above and is subject to the Partnership Act, 1890. Full partnerships, as outlined above, have between two and twenty partners, but more commonly, the number of partners in a full partnership lies between two and four inclusive.
An arrangement in which two or more individuals or other persons (such as a company and an individual) conduct business as partners, whether officially or not. In terms of asset protection, general partnerships can be even worse than sole proprietorships. Anything that one partner does affect all of the partners, because each partner of the general partnership is personally responsible for all obligations of the partnership deals. Thus, each general partner's exposure to risk is increased by a factor equal to the number of general partners in the business.
Incorporate as a Limited Partnership
The limited partnership, which is subject to the Limited Partnership Act 1907. Limited partnerships they are very rare today and account for less than 1% of all partnerships in the UK. A limited partnership is formed when one or more of the partners invest capital into the business but do not participate in running and managing the business. These partners therefore have limited liability as they can only lose the amount of money that they initially invested into the business.
A limited partnership is an association of one or more general partners together with one or more limited partners to conduct business for profit as co-owners. The most important feature of a limited partnership is that the limited partner enjoys limited liability as long as s/he does not participate in the control of the partnership business. The general partners of the limited partnership are the ones who are responsible for the obligations of the limited partnership.
In a limited partnership, it is the general partner who remains liable for the debts and obligations of the entity. For larger risk exposure, a company (corporation) may be formed to serve as the general partner. A corporate general partner is protected from direct attack by a judgement creditor because the ultimate liability for the debts and obligations rests with the shareholders.
By spreading share ownership, individual exposure is considerably reduced. Even without a corporate general partner, risk can be spread by distribution of limited partnership shares. If a judgement creditor obtains a charging order against one partner, the order goes to that partner's share in distributions from the partnership, and not to the entire business. Wit us, you can establish a limited partnership in Delaware, create a limited partnership in Scotland, England, Wales and in BVI.
Start-Up as a Limited Liability Partnership (LLP)
An LLP is similar in some ways to a limited partnership, except that the individual members have lower liabilities to any debts which may arise from running the business. There are more administrative duties involved compared to the partnership business structure. In fact, an LLP is more similar to operating a limited company. In terms of liability, the limited liability partnership is itself liable for debts run up in running the business, rather that the individual members of the LLP. As a result, limited liability partnerships are only recommended for profit running businesses.
An LLP may be formed by two or more persons (individuals or companies) to carry-on a trade or business. To form an LLP, the partners have to file an incorporation document at Companies House. The owners and managers of an LLP are the same. The management structure and relationship between the partners are a matter for agreement between them and may be recorded in a separate LLP agreement, similar to a partnership agreement.
All profits in a limited liability partnership (LLP) are split between the members. The tax liability falls on the individual members, not the LLP itself. Most members are likely to be self-employed, so all income should be declared via self-assessment. If an LLP member is another business, they will be liable to pay corporation tax on any income they receive from the limited liability partnership.
As with other company structures, if the LLP is expecting to generate income of £78,000 or more, they should register for VAT. If they have employees, the LLP should set up a PAYE system to collect income tax and National Insurance contributions.
A UK LLP is not itself liable to tax in the UK as the LLP tax provisions identify other persons (i.e. the members) as the persons who are to be taxed. Accordingly, for the purposes of the Double Taxation Agreements (DTAs) the LLP is not regarded as being resident in the UK and cannot itself therefore claim relief from foreign taxes under such agreements. As is now the case with ordinary and limited partnerships, the members must make the claim.
Assuming they are UK residents in accordance with the provisions of the relevant DTA the members of an LLP are entitled to relief for any withholding tax on overseas dividends. Normally a DTA provides for withholding tax of a maximum of 15% to be deducted and relief for that tax given. Where a partner is an individual then no relief is due in respect of the taxes paid (the underlying taxes) on the profits out of which the dividend is paid.
In the very narrow circumstances where the LLP is not treated as transparent, but instead as a body corporate for tax purposes (such as when the LLP is in liquidation or being wound up in circumstances where transparency cannot be retained), the HM Revenue & Customs take the view that the LLP can itself claim relief for foreign taxes, including if appropriate underlying tax.
There is no personal liability on a member for the LLP's debts and contracts, no joint and several liabilities for the negligence of any member. As a separate legal entity, LLP's may own property, sue, and be sued in LLP's name; members' liability to contribute in a winding-up is limited to the amount they agree to contribute in the event of a winding-up as recorded in the LLP agreement. LLPs are not a separate entity for income tax purposes, profits and losses are passed through directly to the partners.
Problems with partner(s) as the result of misunderstandings, different goals, etc., can weaken or destroy the partnership. Have to apply the same tests to its members, which apply to directors for fraudulent and wrongful trading under the Insolvency Act. Disclosure of information (in particular accounts and an auditors' report) must be filed with the Registrar of Companies and becomes public.
Money and property contributed to the LLP becomes owned by the partnership assets, unless otherwise stated and the contributor is not entitled to its return except as stated in the partnership agreements.
We provide different packages with the different options depending on your business needs; each package offers the complete formation of a limited liability partnership, which is usually ready to commence trading within four to six days. Our packages offer the perfect results for those people who are taking the first step into the business or whose budget won't stretch to bespoke business solutions, there are no dumbfounds and no hidden charges, - what you see is what you pay! We can also assist clients with the special needs or requirements, we could make a tailor made package that would suit your personal needs and wants.
In the case if you would like to register a limited liability partnership in the United Kingdom and you are not UK resident or British citizen, this would not have been a problem if you will appoint us as your LLP incorporation agent. A party to a contract who is not domiciled in England or Wales usually appoints a process agent. We, as your LLP registration agent will act as the agent for the acceptance of service of incorporation process: we can register an LLP in London, incorporate an LLP in Liverpool, form an LLP in Manchester, or in create an LLP in Northern Ireland (in Belfast), we can also form an LLP in Delaware.
The third way to run a business is as a limited company. The business is registered with Companies House and is an entity of its own. There are more rules associated with running a business this way but there may be tax advantages. Those involved have shares in the business proportional to their involvement. A limited company is regarded in law as a separate legal personality, distinct from its shareholders.
For this reason, if the company for any reason is unable to meet its liabilities, the shareholders will only be personally liable for the unpaid amount of their shares. If the shares are fully paid, then the shareholder cannot be asked to pay anything further.
The higher level requirements for limited liability companies are as follows:
When you set up your limited company, you have a legal obligation to tell HMRC that your company exists and is liable for tax. This is also the time to tell them who your accountant is. Often you will need to fill in a form to authorise your accountant to act on your behalf.
It is therefore, strictly speaking, incorrect to say that a company has limited liability; it is the shareholders whose liability is limited - up to the unpaid amount of their shares. This situation must be contrasted with the personal liability of a sole trader or a partner in a partnership (with the exception of a partner with limited liability or in the case of a limited liability partnership (LLP)). In these cases the sole trader or partner may be personally liable for any debts which the business is unable to meet.
As noted above, there may be instances when personal liability cannot be limited. This situation usually affects directors who may be personally liable if they have acted fraudulently of negligently. In particular, you should be aware of the personal liability which can accrue to directors if their company trades whilst it is insolvent.
Whilst the limitation of liability can prove attractive, you should be aware that in certain cases, notably when dealing with banks or other financial organisations, personal guarantees may be requested from the directors, and/or shareholders. This may then negate this particular advantage.
Filing Your Company Tax Return with the HMRC
Company Tax ReturnOnce a year you will get a notice from HMRC to file a company tax return. It's something that's worth putting in your diary each year, as it is your responsibility to fill out the tax return even if the notice doesn't reach you for whatever reason. It involves filling out a company tax return form CT600 plus sending off accounts information prepared by your accountant.
HMRC is encouraging businesses to do this online as much as possible. As well as speeding up the process, the tax calculations are done by the website. Many accountants use special software to prepare company tax returns, and submit them online for you.
Even though you are using an expert to complete your company tax return, it is worth you checking all of the details and ensuring everything is correct. Legally it is the company's responsibility to ensure the information sent is true and accurate. Moreover, it is you - not your accountant - that will have to pay any penalties for getting it wrong.
Who is Subject to Corporation Tax Requirements
The following limited companies and unincorporated organisations are subject to Corporation Tax requirements:
The taxable profits or surpluses of these businesses and organisations are subject to Corporation Tax requirements. A company or organisation subject to Corporation Tax requirements is known to HMRC for Corporation Tax purposes as being 'within the charge to Corporation Tax', 'chargeable to tax' or in 'the charge to tax'.
Who is Not Subject to Corporation Tax Requirements
Businesses and organisations that are not subject to Corporation Tax requirements include:
If your business or organisation is not subject to Corporation Tax, you do not need to meet Corporation Tax deadlines and requirements. This does not mean your business is exempt from all taxes, as you may have to complete a self assessment return.
Your business is self-assessed over accounting periods. For most businesses these are 12 months long and match the dates you have your accounts drawn up. It is possible to set accounting periods for less than 12 months, although not longer. Payment of corporation tax itself is due 9 months and one day after the company's "normal due date" - usually the last day of your annual accounting period.
Each tax return must contain your company name, registration number, the registered office and tax reference number. You will find this on the notice to deliver a company tax return.
The UK draws a distinction between employment income and self-employment income. Directors are taxed on the basis that they have employment income. But in some countries the dividing line would be drawn at a different point and directors who are not full-time officers may be treated as independent contractors (that is, as if they were self-employed). All businesses have to comply with certain legal requirements. This can include requirements in relation to Health and Safety, Trade Descriptions Act, Data Protection Act and Employment Law, to name but a few.
As well as being a legal requirement, good health and safety practices pay for themselves by improving your reputation with customers, the local community and most importantly your own employees. If you employ five or more people, you are required to prepare a statement of policy on health and safety at work and to make arrangements to put this policy into practice.
There are two rates of corporation tax depending on the level of profits you make. In 2011 to 2012, you will be charged 20 per cent on profits of up to £300,000. This is known as small companies' rate and will apply to IT contractor companies. The main rate is 26 per cent on profits of £1.5 million and above.
Trading and Non-Trading for Corporation Tax Explained
HM Revenue & Customs (HMRC) may consider your company or organisation to be 'active' for Corporation Tax purposes when it is, for example, carrying on business activity, trading or receiving income. However, there are a number of circumstances where HMRC would not consider your company or organisation active for Corporation Tax purposes.
In this case, your company or organisation is 'dormant' for example - not active or not trading. HMRC may also deem your unincorporated organisation, such as a members' club, dormant for Corporation Tax purposes if it is active or trading but it's due to pay Corporation Tax of less than £100.00 for an accounting period.
What is Active for Corporation Tax Purposes
Generally your company or organisation is considered to be active for Corporation Tax purposes when it is, for example:
This definition of being active for Corporation Tax purposes is not necessarily the same as that used by HMRC in relation to other tax areas such as VAT, or by other government agencies such as Companies House. It may also not match definitions in the various accounting conventions that are used to prepare audited accounts, such as the Financial Reporting Standards (FRS) issued by the Accounting Standards Board, or the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.
When Your Company or Organisation Has Not Yet Started Trading
Generally, HMRC considers that your company or organisation has not yet become active or started trading if it has not yet engaged in any business activity. In this context, business activity means carrying on a trade or profession, or buying and selling goods or services with a view to making a profit or surplus. Your newly formed company or organisation may not be active.
However, you may still carry out activities (known as ‘pre-trading activities') or incur costs (known as ‘pre-trading expenditure') before you officially open your business without HMRC deeming that you have started trading. Activities or expenditure to do with setting up a business that are not considered trading by HMRC for Corporation Tax purposes include:
You need to keep all of your records for at least six years, and some would argue it's sensible to keep them longer than that. This includes all receipts and invoices, and the record of all sales and purchases made. HMRC says it is acceptable to keep records in legible alternative such as an optical imaging system, where documents are scanned into a computer.
Private Companies Deadlines and Penalties
You can send your company tax return in any time after the end of your accounting period (your year end). You have to do it by the statutory filing date. This is usually the later of 12 months after the end of your accounting period, or three months after you get a notice to deliver a company tax return.
If you send the tax return in late your company will be charged a penalty. There may also be a penalty if the tax return is incorrect.
If you do owe any corporation tax, this is due nine months and one day after something called your normal due date. This is the last day of your accounting period. If that was 31st December, your tax payment will be due on 1st October. There may be a penalty and interest charges if you pay it late.
Coddan specialising in incorporation of a private limited companies by shares or limited by guarantee, public limited companies by shares or limited by guarantee, partnerships (in England, Wales, Scotland and Ireland incl. Republic of Ireland) and secretarial, notary and accounting services.
If required, we can provide a registered office address facility (we are offering registered office addresses in London, registered office addresses in Bristol, Cardiff, Edinburgh, Glasgow, Sussex, Manchester, and also in Birmingham. Upon special request, we can provide a registered office address in any city or town in England or Wales. We can also provide a telephone number for your company with call forwarding from any UK city and town.
If your business is at an advanced stage of development your needs may be varied and you will need to make an appointment with us to discuss your circumstances. You can use our office where we will store all your company records and provide you with a summary of the financial position of your business. Every quarter you can then meet with one of our accountants for a health check on your business and plan for any new developments. Alternatively you may need specific services such as VAT returns, PAYROLL or/and statutory accounts preparation.
Company Administration and Accounts
If you want to focus on earning company turnover and do not want the burden of company administration and accounts, this service will suit you. Get rid of the hassle without losing control! This service is designed for the busy executive who wants to focus on earning company income without being bogged down with the daily administration involved with running a company.
All you will have to do is invoice your client for your income and provide us with a copy of these along with the business expenses that you incur. This service will cover the following:
We calculate your tax liability on a pro rata basis so that you are providing for your tax liability correctly on an on-going basis and not over or under providing. If you are uncertain about your IR35 status, every time your company gets paid we calculate what your IR35 liability would be if you fell within the legislation. You can then opt to retain funds in your company account to cover yourself until you have decided your status.
You, the director are in control; we do not control your company. You determine what your expenses will be, how much dividend you want paid, how much salary you want paid. We are sensitive to your needs, available for advice and flexible … unlike composite companies or the managed service of our competitors.
If you have questions about legal aspects of your company incorporation application, you should speak to one of our consultants. We are very happy to provide a practical support, we have a team of professional business advisers and consultants who can support you to strengthen and grow your business.
We can help if you need a qualified advice and guidance in any of the following areas:
In the case if you would like to register a company in the United Kingdom and you are not UK resident or British citizen, this would not have been a problem if you will appoint us as your incorporation agent. A party to a contract who is not domiciled in England or Wales usually appoints a process agent. We, as your incorporation agent will act as the agent for the acceptance of service of incorporation process in England, Wales, Scotland, or Ireland (in Belfast or Dublin).
You will not be left on your own once you have started up a company, we still are here to help you with any problems that you may face as you establish and grow your business. Our advisers will answer any questions you may have and explain what you, or we, might do in your current circumstances. If necessary, you may return to us for further help as matters progress. Our team of full-time professional business advisers can guide you through the essential steps to launching your own business. Please, take a note that we can have meetings with current of positional customers by appointment only.
Do I Need a Visa for the UK to Start a Business in the UK?
The United Kingdom is the home of Europe's largest city and is embedded in the culture, vocabulary and dreams of English speakers worldwide. It is seen as an economic hub for trade between Europe and North America with the United Kingdom benefiting from the situation for centuries. The United Kingdom still has one of the strongest economies in the world today.
The United Kingdom has a population of diverse backgrounds, given the variety of people who have settled here over the centuries. The majority of the population is Anglo-Saxon which is predominantly German-Scandinavian in origin.
Since the middle of last century there has been significant immigration from many ex-colonies, especially the Caribbean, Pakistan and India. The United Kingdom has a positive view on increasing the multicultural population of the country with the amount of people immigrating to the United Kingdom increasing every year. The UK is in the process of liberalising its immigration laws and has a generally open and positive approach concerning those who wish to enter the country to work or set up a business.
British citizens, those with Right of Abode or settled in the UK and nationals of European Economic Area countries (see Appendixes for a list of these countries) are permitted to live and work freely in the UK. All others can apply to enter the UK to work or set up in business. Nationals of certain countries, known as visa nationals, require a visa or prior entry clearance to enter the UK for any reason. Others require prior entry clearance, depending on the reason for coming to the UK.
As many know, employees have rights on how many hours a week they must work on average. Most employees do not work more than forty-eight hours a week and receive overtime pay for additional hours put in. When self-employed, however, these rules do not apply. A self-employed person could work seventy hours a week, if that is what is needed, and would get paid no overtime or nothing else additional. Because they work for themselves, their wages depend on what they bring in.
Another responsibility that is given to the self-employed is taxing their income. A self-employed person must allot for his or her own tax payments and follow the guidelines set by the government. Normal employees depend on their employers to do this task for them and are not required to worry about this.
Well there are pros and cons to each. A limited company means you will have to have all your accounts audited by an accountant which will cost you around £500.00. However, there are substantial tax benefits from being a limited company as you can save on paying National Insurance Class 4 contributions.
Here are some examples:
Being an LTD company also protects your personal assets should your business get into financial difficulty. If you're starting out a capital is restricted and you expect to earn under £20,000 then it may worth sticking to being self employed and then move over to being a private limited company when have more money available to you.
Typically, self employed people get a bad deal with getting competitive mortgages. The reasons why are obvious; to the lender they are a risk, an unknown quantity. They could earn £100,000 one year, but only £10,000 the next year, so it's clear why lenders are cautious.
Traditionally self employed people had to go for self certified mortgages which means you need no proof of income. It may sound ideal but the rates are much less competitive, usually 1% to 4% above normal mortgages which is quite costly.
Over the last few years with more and more people working on casual contracts and freelance work lenders are becoming more flexible. If you can prove your income over the last three years then you stand a very good chance. Proof will need to be provided by a certified, or better yet a chartered accountant. Many lenders will accept your tax SA302 form which show your income declared to the tax office.
For those with less than 2 years proof may find it difficult to get anything other than a self-certified mortgage. If you are self-employed and your partner is on fixed income then this will make your chances of securing a competitive mortgage much improved.
All businesses have to comply with certain legal requirements. This can include requirements in relation to Health and Safety, Trade Descriptions Act, Data Protection Act and Employment Law, to name but a few.
As well as being a legal requirement, good health and safety practices pay for themselves by improving your reputation with customers, the local community and most importantly your own employees. If you employ five or more people, you are required to prepare a statement of policy on health and safety at work and to make arrangements to put this policy into practice.