UK History and Law

Directors

The Companies Act 2006 requires a private company to have at least one director. However, a company's articles of association could impose a higher minimum requirement. At least one director must be an individual. 

It is up to the members to appoint the directors who will run the company on their behalf. The only restrictions that prevent anyone becoming a director are:

they must not have been disqualified from acting as a company director (unless the court has given them permission to act for a particular company)

they must not be an undischarged bankrupt (unless they have been given permission by the court to act for a particular company)

they must not be under the age of 16

Directors have a responsibility to prepare and deliver documents, on behalf of the company, to Companies House as and when required by the Companies Act. These include, in particular:

the annual return

the annual accounts

notification of any change in the company's officers or in their personal details

notification of a change to the company's registered office

allotment of shares

registration of charges

Secretary

Private companies do not have to appoint a secretary unless their articles of association require them to, although they may choose to do so anyway.

The legislation does not set out the role of the company secretary; this is normally contained in their contract of employment. However, the company secretary might normally undertake the following:

maintaining the statutory registers

ensuring that the company files statutory information promptly

providing members and directors with notice of meetings

providing members with proposed written resolutions and auditors with any resolutions it has passed

delivering copies of resolutions and agreements to Companies House

supplying a copy of the accounts to every member of the company, every debenture holder and every person who is entitled to receive notice of general meetings

keeping, or arranging for the keeping of copies of all members' resolutions (passed other than at general meetings), and minutes of all proceedings and general meetings

ensuring that people entitled to do so can inspect company records

custody and use of the company seal (if the company chooses to have one)

be a co-signator for execution of a document by a company

authenticating forms for submission to Companies House (a company secretary cannot authenticate the company's annual accounts)

The secretary is an officer of the company and may be criminally liable for defaults committed by the company.

Shareholders

UK private companies must have at least one shareholder. Shareholder can be a natural person or boy corporate, resident or non-resident. 

Every company must keep a register of its members. There must be entered in the register—

the names and addresses of the members,

the date on which each person was registered as a member, and

the date at which any person ceased to be a member.

In the case of a company having a share capital, there must be entered in the register, with the names and addresses of the members, a statement of—

the shares held by each member, distinguishing each share by its number (so long as the share has a number), and where the company has more than one class of issued shares, by its class, and

the amount paid or agreed to be considered as paid on the shares of each member.

There is now no statutory requirement for a private company to hold any general meetings, not even an Annual General Meeting. This change was introduced when Part 13 (sec281 - sec361) of the Companies Act 2006 came into effect on 1st. October 2007. 

Some companies' articles will require them to hold an AGM and any such provision will continue to be binding on the company until the articles are amended. A company may hold an AGM even though not bound to by the Act or its articles.

Beneficiary

At the end of 2016 Companies House and the Department for Business, Energy & Industrial Strategy published guidance explaining the procedure of keeping the Register of People with Significant Control (PSC) by companies and partnerships. The main document is called “Register of People with Significant Control. Guidance for Companies, Societates Europaeae and Limited Liability Partnerships”.

In accordance with the above, UK companies and LLPs must maintain PSC registers starting from 6 April 2017. The requirement applies to:

companies limited by shares;

limited liability companies (LLP);

companies limited by guarantee;

unlimited companies; and

Societates Europaeae.

A person with significant control (PSC) of the company is an individual who meets (any) one or more of the following conditions:

An individual who holds more than 25% of shares in the company

An individual who holds more than 25% of voting rights in the company

An individual who holds the right to appoint or remove the majority of the board of directors of the company

An individual who has the right to exercise, or actually exercises, significant influence or control over the company

Where a trust or firm would satisfy one of the first four conditions if it were an individual. Any individual holding the right to exercise, or actually exercising, significant influence or control over the activities of that trust or firm. 

Information to be entered on the PSC register: 

Name;

Date of birth;

Nationality;

Country where the PSC usually lives;

Address

Date when the person became a PSC in relation to the company etc

This information must be confirmed by the PSC before entered into the register. Companies House keeps information about PSCs indefinitely.

Share Capital and Shares

Minimum share capital for UK private companies is 1 share and there is no maximum share capital limit. 

Companies incorporating with share capital must complete a statement of capital and initial shareholdings as part of the application to incorporate and as part of any annual return filing. The statement of capital must show the following details of the capital:

the total number of shares of the company

the aggregate nominal value of those shares

for each class of shares - prescribed particulars of the rights attached to the shares, the total number of shares of that class, the aggregate nominal value of shares of that class

the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium)

A company may have as many different types of shares as it wishes, all with different conditions attached to them. Typically, share types fall into the following categories:

Ordinary: These are the ordinary shares of the company with no special rights or restrictions. The company may divide them into classes of different values

Preference: These shares carry a right that the company should pay any annual dividends available for distribution on these shares before other classes

Cumulative preference: These shares normally carry a right that, if the company cannot pay the dividend in one year, it will carry it forward to successive years

Redeemable shares: These shares are issued by the company with an agreement that it will buy them back at the option of either the company or the shareholder after a certain period, or on a fixed date. A company cannot have only redeemable shares

Under the Companies Act 2006 any company limited by shares can (subject to prohibition or restriction in its articles) re-denominate its share capital, or any class of its share capital, into other currencies by passing a resolution.

A company may increase its share capital by allotting additional shares. A company cannot generally reduce its share capital otherwise than as permitted by statute and confirmed by the court. However, under the Companies Act 2006, a company can reduce its capital in the following circumstances:

Reduction following redenomination

Reduction supported by a solvency statement

Reduction confirmed by a court order

Voluntary Strike off and Dissolution

In what circumstances may a company apply to be struck off the register?

A company may apply to the registrar to be struck off the register and dissolved. The company can do this if it is no longer needed. For example, the directors may wish to retire and there is no one to take over from them; or it is a subsidiary whose name is no longer needed; or it was set up to exploit an idea that turned out not to be feasible. Some companies who are dormant or non trading choose to apply for strike off. If you have decided that you no longer want to retain your company and wish to have it struck off, the registrar will not normally pursue any outstanding late filing penalties unless you restore the company to the register at a later stage.

This procedure is not an alternative to formal insolvency proceedings where these are appropriate. Even if the company is struck off and dissolved, creditors and others could apply for the company to be restored to the register. 

When can I not apply to strike my company off the register? 

An application for voluntary striking off can only be made by the company, and must be made on the company's behalf by its directors or a majority of them.

Sections 1004 and 1005 of the Companies Act 2006 set out the circumstances in which the company may not apply to be struck off. For example, the company may not make an application for voluntary strike off if, at any time in the last 3 months, it has:

traded or otherwise carried on business;

changed its name;

made a disposal for value of property or rights that, immediately before ceasing to trade or otherwise carry on business, it held for the purpose of disposal for gain in the normal course of trading or otherwise carrying on business. For example, a company in business to sell apples could not continue selling apples during that 3 month period but it could sell the truck it once used to deliver the apples or the warehouse where they were stored;

engaged in any other activity except one which is necessary or expedient for the purpose of: making an application for strike off or deciding whether to do so(for example, a company may seek professional advice on the application and pay the costs of submitting the 'Striking off application by a company, Form DS01), concluding the affairs of the company, complying with any statutory requirement.

A company cannot apply to be struck off if it is the subject, or proposed subject, of:

any insolvency proceedings such as liquidation

a section 895 scheme (that is a compromise or arrangement between a company and its creditors or members)

However, a company can apply for strike off if it has settled trading or business debts in the previous three months.

What should I do before applying?

There are safeguards for those who are likely to be affected by a company's dissolution. If your company has creditors, members etc, you should warn them, before applying, as any of them may object to the company being struck off. You should deal with any loose ends, such as closing the company's bank account, the transfer of any domain names - before you apply.

You may notify any other organisation or party who may have an interest in the company's affairs, otherwise they might later object to the application. Examples include Her Majesty's Revenue and Customs, local authorities, training and enterprise councils and government agencies.

From the date of dissolution, any assets of a dissolved company will belong to the Crown. The company's bank account will be frozen and any credit balance in the account will pass to the Crown. 

How do I apply?

You must complete a 'Striking off application by a company, Form DS01'. 

The form must be signed and dated by:

the sole director, if there is only one

by both, if there are two

by all, or the majority of directors, if there are more than 2

It will help Companies House if you provide the name, address, and telephone number of the person we should contact if we have any queries about the application. Please note, this information will appear on the company's public record when we register the form. Depending on where the company was registered you should then send the completed form, with the £10 fee, to Companies House, Cardiff, Edinburgh or Belfast. Cheques should not be payable from the account of the company applying for strike-off. 

Who must I inform? 

The directors who make the application must, within 7 days of sending the application to the registrar, send a copy to the following persons:

members, usually the shareholders

creditors, including all contingent (existing) and prospective (likely) creditors such as banks, suppliers, former employees if the company owes them money, landlords, tenants (for example, where a bond is refundable), guarantors and personal injury claimants. Also, you must notify appropriate offices of Her Majesty's Revenue and Customs (HMRC) and Department of Work and Pensions (DWP) if there are outstanding, contingent or prospective liabilities

employees

managers or trustees of any employee pension fund

any directors who have not signed the form

The company's directors must also send a copy of the application to any person who, after the application has been made, becomes a director, member, creditor or employee of the company, or a manager or trustee of any employee pension fund of the company. This must be done within 7 days of the person becoming one of these. They must also send a copy of the application to any person who becomes one of the above at any time after the day the company made the application for voluntary strike off. This obligation continues until the dissolution of the company or the withdrawal of the application. 

What happens when Companies House receives the application? 

Companies House will examine the form and if it is acceptable it will register the information and put it on the company's public record. Companies House will send an acknowledgement to the address shown on the form and will also notify the company at its registered office address to enable it to object if the application is bogus.

The registrar will publish notice of the proposed striking off in the Gazette to allow interested parties the opportunity to object.

A copy of this notice will be placed on the company's public record. If there is no reason to delay the registrar will strike the company off the register not less than 3 months after the date of the notice. The company will be dissolved on publication of a further notice stating this in the relevant Gazette.

What is the Gazette? 

The Gazette is the official newspaper record in the United Kingdom. There are 3 of them: the London Gazette, for companies incorporated in England and Wales; the Edinburgh Gazette, for companies incorporated in Scotland; and the Belfast Gazette, for companies incorporated in Northern Ireland.

When the registrar publishes a notice to strike off or restore a company, the notice will appear in the Gazette for the part of the United Kingdom in which the company was formed. The gazettes are published weekly.

What if the company ceases to be eligible for striking-off or I change my mind and want to withdraw my application? 

The directors must ensure the application is withdrawn immediately by completing the 'Withdrawal of striking off application by a company', Form DS02 if they change their mind or the company ceases to be eligible for striking-off. This may be because, after applying to be struck off, the company:

trades or otherwise carries on business;

changes its name;

for value, disposes of any property or rights except those it needed in order to make or proceed with the application (for example a company may continue the application if it disposes of a telephone which it kept to deal with enquiries about its application);

becomes subject to formal insolvency proceedings or makes a section 900 application (a compromise or arrangement between a company and its creditors);

engages in any other activity, unless it was necessary to: make or proceed with a striking-off application, conclude those of its affairs that are outstanding because of the need to make or proceed with an application (such as paying the costs of running office premises while concluding its affairs and then finally disposing of the office), comply with a statutory requirement

Any director may file the application to withdraw the strike off action to the registrar using our WebFiling service. Alternatively, the application can be withdrawn by submitting a paper Form DS02.

Can anyone object to dissolution?

Any interested party can object to the registrar.

Objections or complaints must be in writing and sent to the registrar with any supporting evidence, such as copies of invoices that may prove the company is trading. Reasons could include:

if the company has broken any of the conditions of its application for example, it has traded, changed its name or become subject to insolvency proceedings during the three-month period before the application, or afterwards;

if the directors have not informed interested parties;

if any of the declarations on the form are false;

if some form of action is being taken, or is pending, to recover any money owed (such as a winding-up petition or action in a small claims court);

if other legal action is being taken against the company;

if the directors have wrongfully traded or committed a tax fraud or some other offence.

Offences and penalties

It is an offence:

to apply when the company is ineligible for striking-off;

to provide false or misleading information in, or in support of, an application;

not to copy the application to all relevant parties within seven days;

not to withdraw application if the company becomes ineligible.

The offences attract a fine of up to a maximum of £5,000 on summary conviction (before a magistrates' court or Sheriff Court) or an unlimited fine on indictment (before a jury). If the directors breach the requirements to give a copy of the application to relevant parties and do so with the intention of concealing the application, they are also potentially liable to not only a fine but also up to seven years imprisonment. Anyone convicted of these offences may also be disqualified from being a director for up to 15 years.

Enforced Liquidation

Can the registrar strike a company off the register on his own initiative?

Yes, if it is neither carrying on business nor in operation. The registrar may take this view if, for example:

he has not received documents from a company that should have sent them to him;

mail that the registrar has sent to a company's registered office is returned undelivered;

the company has no directors.

Before striking a company off the register, the registrar is required to write two formal letters and send notice to the company's registered office to inquire whether it is still carrying on business or in operation. If he is satisfied that it is not, he will publish a notice in the relevant Gazette stating his intention to strike the company off the register unless he is shown reason not to do so.

A copy of the notice will be placed on the company's public record. If the registrar sees no reason to do otherwise, he will strike off the company not less than three months after the date of the notice. The company will be dissolved on publication of a further notice stating this in the relevant Gazette.

How can I avoid this action?

If you want your company to remain on the register, you must reply promptly to any formal inquiry letter from the registrar and deliver any outstanding documents. Failure to deliver the necessary documents may also result in the directors being prosecuted.

Can I object?

The registrar will take into account representations from the company and other interested parties, for example, creditors. If there is good reason not to strike the company off the register, he may suspend the action until the objection is resolved.

What happens to the assets of a dissolved company?

From the date of dissolution, any assets of a dissolved company will be 'bona vacantia'. Bona vacantia literally means “vacant goods” and is the technical name for property that passes to the Crown because it does not have a legal owner. The company's bank account will be frozen and any credit balance in the account will be passed to the Crown.

Restoration by Court Order

The registrar can only restore a company if he receives a court order, unless a company is administratively restored to the register. Anyone who intends to make an application to the court to restore a company is advised to obtain independent legal advice.

Any company which is restored to the register is deemed to have continued in existence as if it had not been struck off and dissolved.

Who can apply to the Court to restore a company to the register?

Generally, any of the following may make an application for restoration:

any former director, member, creditor or liquidator

any person who had a contractual relationship with the company or who had a potential legal claim against the company

any person who had an interest in land or property in which the company also had an interest, right or obligation

any manager or trustee of the company's former employees' pension fund

any other person who appears to the Court to have an interest in the matter

How long have I got to make an application to the Court?

For companies dissolved under Section 1000 or 1003 of the CA2006 and 652 or 652a of the 1985 Act.

As a general rule restoration by court order can be applied for up to six years from the date of dissolution, if the dissolution date is on or after 1st October 2009. If the dissolution date is on or before 30th September 2009, transitional arrangements exist to take account of the new 2006 Companies Act for restoration.

For companies dissolved under Section 201 and 205 and Para 84 of Schedule B1 of the Insolvency Act and 652 of 1985 Act or Section 1001 of the CA2006.

Companies dissolved on or before 30th September 2007 following any form of liquidation are out of time to restore the company.

Companies dissolved on or after 1st October 2007 following any form of liquidation have six years from the date of dissolution.

NB. There are no time limits for personal injury claims in any of the above scenarios.

Why might a company be restored with a different company name?

The registrar will normally restore a company with the name it had before it was struck off and dissolved. However, if at the date of restoration the company's former name is the same as another name on the registrar's index of company names, he cannot restore the company with its former name. You can check whether the company's name is the same as another on the register by using the WebCheck service.

If the name is no longer available, the court order may state another name by which the company is to be restored. On restoration, the registrar will issue a change of name certificate as if the company had changed its name.

Alternatively, the company may be restored to the register as if its registered company number is also its name. The company then has 14 days from the date of restoration to pass a resolution to change the name of the company. You must deliver a copy of the resolution and a 'notice of change of name by resolution of directors' (Form NM05) to Companies House with the appropriate fee. The registrar will then issue a change of name certificate.

!It is an offence if the company does not change its name within 14 days of being restored with the number as its name!

Are there costs or penalties?

Yes. Where property has become bona vacantia, the Court may direct that the claimant meets costs of the Crown representative in dealing with the property during the period of dissolution or in connection with the proceedings. The Court may also direct that the claimant meets the registrar's costs in connection with the proceedings for the restoration.

The company must normally pay any statutory penalties for late filing of accounts delivered to the registrar outside the period allowed for filing. The penalties that may be due are:

unpaid penalties outstanding on accounts delivered late before the company was dissolved

penalties due for accounts delivered on restoration, if the accounts were overdue at the date the company was dissolved

The appropriate filing fee must also be paid on submission of outstanding documents.

The level of any late filing penalty depends on how late the accounts are when the registrar receives them. For example, a set of accounts that you should have delivered 2 months before a private company was dissolved are normally regarded as 2 months late if you deliver them on restoration and you must pay the relevant penalty. The company is not liable for late filing penalties for accounts received on restoration but which became due while the company was dissolved.

What happens when the court makes an order for restoration?

The applicant must deliver a copy of the court order to the registrar to restore the company. A company is restored when you deliver the order. When restoring a company that was registered in Scotland, the registrar in Scotland will require a copy of the order certified by the court.

What happens when the company has been restored?

When it has been restored, the general effect is that a company is deemed to have continued in existence as if it had not been dissolved or struck off the register. The Court may give directions or make provision to put the company and all other persons in the same position as they were before the company was dissolved and struck off. A notice will also be placed in the relevant Gazette.

Administrative Restoration

Under certain conditions, where a company was dissolved because it appeared to be no longer carrying on business or in operation, a former director or member may apply to the registrar to have the company restored. This is called 'administrative restoration'. If the registrar restores the company it is deemed to have continued in existence as if it had not been dissolved and struck off the register.

Who can apply to have a company restored to the register?

Only a former director or former member of the company, who was a director or member at the time the company was dissolved can apply.

Can an application for administrative restoration by made in respect of any company?

No. To be eligible for administrative restoration, the company must have been:

struck off the register under sections 1000 and 1001 of the Companies Act 2006, the Companies (Northern Ireland) Order 1986 (SI 1986/1032 (NI 6) or section 652 of the Companies Act 1985

dissolved for no more than six years at the date the registrar receives your application for restoration

If a company meets the above criteria, an application for restoration may be made if it meets the following conditions: 

it must have been carrying on business or in operation at the time it was struck off

if any property or rights belonging to the company became bona vacantia, the applicant must provide the registrar with a statement in writing from the relevant Crown Representative giving consent to the company's restoration. This statement is called a 'Bona Vacantia waiver letter'

it has delivered all documents necessary to bring the company up to date and paid any outstanding late filing penalties.

How do I apply for administrative restoration?

You must send an 'Application for administrative restoration' (Form RT01) to the registrar which includes a statement of compliance confirming that the applicant is legally entitled to make the application and that the conditions for restoration are met.

The registrar's fee for processing the application is £100. 

What are the other costs or penalties involved in making an application for administrative restoration?

The applicant must meet the Crown representative's costs or expenses (if demanded). The company must pay any statutory penalties for late filing of accounts delivered to the registrar outside the period allowed for filing. 

You must also pay the appropriate filing fee on submission of any outstanding documents.

The level of any late filing penalty depends on how late the accounts are when we receive them. In the case of accounts delivered on restoration, the registrar will normally disregard the period during which the company was dissolved. For example, a set of accounts that you should have delivered 2 months before a private company was dissolved are normally regarded as 2 months late if you deliver them on restoration and you must pay the relevant penalty before the restoration of the company.

The company is not liable for late filing penalties for accounts received on restoration but which became due while the company was dissolved. 

What happens next?

The registrar will give notice to the person who has applied for restoration of his decision.

If the registrar decides that he will restore the company to the register the restoration will take effect from the date he sends the notice. The notice will include the company's registered number and the name of the company. If the company is restored to the register under a different name or with the company number as its name, that name and its former name will appear on the notice.

If the registrar decides not to restore the company to the register, the applicant may apply to the Court for restoration within 28 days even if the period for restoration has expired.

Why would a company be restored with a different company name?

If at the date of restoration the company's former name is the same as another name on the registrar's index of company names, it will need to choose an alternative name. The application for restoration may state another name by which the company is to be restored. You can check whether the company's name is the same as another on the register by using the WebCheck service. 

Alternatively, we may restore the company to the register as if its registered number is also its name. The company then has 14 days from the date of restoration in which to change the name of the company. Alternatively, the directors can pass a resolution to change the company name. You must deliver a copy of the resolution and notice (Form NM05) of the change of name to Companies House including the appropriate fee.

It is an offence if the company does not change its name within 14 days of the company being restored with the company number as its name.

What happens when the company has been restored?

When it has been restored, the general effect is that a company is deemed to have continued in existence as if it had not been dissolved or struck off the register. An application can be made to the Court for directions or provision required to put the company and all other persons in the same position as they were before the company was dissolved and struck off. Any such application to the Court must be made within 3 years of the company being restored.

Individual Taxation

Personal Income Tax

Individuals who are resident and domiciled in the UK are subject to tax on their worldwide income and gains. Different treatment may apply where a person, although resident, is not domiciled in the UK.

A new “statutory residence test” (SRT) applies as from 6 April 2013. The SRT is based on a combination of physical presence and connection factors with the UK and other jurisdictions. Domicile is a distinct concept from residence. An individual's domicile status may be determined by the domicile of his/her parents or can be acquired by choice. UK resident, but nondomiciled taxpayers can enjoy favorable tax treatment in respect of income and assets outside the UK.

Residents who are not domiciled in the UK may make a claim for the remittance basis of taxation to apply to overseas income, in exchange for an additional tax liability of GBP 30,000 per annum for taxpayers who have been UK resident for seven out of the past nine years, and rising to GBP 50,000 once resident for 12 out of the last 14 tax years. The remittance basis also may apply without the requirement to make a claim, if (broadly) the unremitted overseas income (and overseas capital gains) is less than GBP 2,000.

Taxable income includes:

earnings from employment

earnings from self-employment

most pensions income (State, company and personal pensions)

interest on most savings

income from shares (dividends)

rental income

income paid to you from a trust

Income tax is charged at progressive rates. Income Tax rates 2014 to 15 by tax band and type of income are as follows:

Income, GBP	Rate on all income except dividends	Rate on dividends
0-2,880 (starting rate for savings)	10,00%	N/A
0-31,865 (basic rate)	20,00%	10,00%
31,866-150,000 (higher rate)	40,00%	32.5%
Over 150,000 (additional rate)	45,00%	37.5%

Dividends from UK companies and many non-UK companies attract a nonpayable tax credit. (The credit is not available where the individual’s holding in a non-UK company is 10% or more and the company is located in a territory that has not concluded an appropriate tax treaty with the UK.)

Capital Gains Tax

Individuals who are domiciled and resident in the UK are subject to capital gains tax on all chargeable assets, regardless of where they are situated. Similar to the rules for overseas income, an individual who is not domiciled in the UK may make a claim for the remittance basis of taxation to apply to any capital gains on non-UK assets. An annual exemption is available to reduce capital gains (GBP 10,900 for 2013/14), except in tax years where a claim for the remittance basis is made. Where individuals who leave the UK to become nonresident realize gains in a tax year after their departure, such gains are not chargeable to UK capital gains tax, unless the individuals are absent from the UK for less than five tax years and they acquired the asset before they left.

The rate of capital gains tax is determined by the total of capital gains and income. Capital gains tax is payable at a rate of 28% where an individual is liable to pay income tax at the higher rate or the dividend upper rate. For 2013/14, if taxable income is less than GBP 32,011, the rate of capital gains tax is 18%, except to the extent the gains, when added to income, would be in excess of the GBP 32,010 limit. In that case, the excess is taxed at 28%.

Entrepreneurs’ relief reduces the rate of capital gains tax to 10% for certain business assets, subject to a lifetime limit of GBP 10 million of gains per individual. No tax is payable on gains up to the annual exempt amount (GBP 10,900 for 2013/14).

Administration and compliance

The tax year is 6 April to 5 April of the following year.

Tax on employment income is withheld by the employer under the Pay As You Earn (PAYE) system and remitted to the tax authorities. Tax on income not subject to PAYE and capital gains tax are self-assessed. If an individual is required to file a tax return, it must be filed by 31 October (or 31 January, if filing online) after the tax year. Payment of tax is due by 31 January after the tax year. 

Individuals are liable to a penalty of GBP 100 for failure to file a tax return by the due date. The penalties escalate if the return is filed more than three months after the due date. Tax-geared penalties also can be sought for matters such as late payment of tax and tax returns that are carelessly or deliberately incorrect. Interest is paid on tax paid late.

Corporate Income Tax

Corporation Tax is a tax on the taxable profits of limited companies and other organisations including clubs, societies, associations and other unincorporated bodies. 

A UK resident company is subject to corporation tax on worldwide profits and gains, with credit given for overseas taxes. Foreign profits (and losses) (including those from certain capital assets) arising from the permanent establishment of a UK resident company may be excluded by making an irrevocable election. The effect of the election may be deferred where there have been losses in any of the PEs. There are anti-diversion rules in based on the new CFC rules that may restrict the profits that can be excluded from the charge to UK tax by virtue of the election.

A nonresident company is subject to tax only in respect of UK-source profits, which include the income of a UK PE, income from UK real estate, certain UK-source interest income and gains on assets used for purposes of a PE’s trade. 

The following limited companies and unincorporated organisations are subject to Corporation Tax requirements:

limited companies incorporated in the UK

foreign-based companies with a permanent place of business in the UK

members' clubs, such as social clubs, sports clubs and holiday clubs

societies, such as friendly societies and provident societies

associations, such as housing associations and trade associations

co-operatives

other unincorporated associations

groups of individuals carrying on a business that is not a partnership

charities, or companies that are subsidiaries of - or wholly owned by - a charity

NHS foundation trusts if they are carrying out significant commercial activities that are not part of core health care delivery, such as running a commercial laundry

Taxable profits for Corporation Tax include: 

profits from taxable income such as trading profits and investment profits (except dividend income which is taxed differently)

capital gains - known as 'chargeable gains' for Corporation Tax purposes

Certain activities carried out by organisations that are otherwise subject to Corporation Tax requirements are exempt from corporation tax:

trading profits generated by charities where those profits arise from, and are applied to, charitable purposes

profits from any fundraising events run by charities or voluntary organisations provided that those profits are applied to charitable purposes

HMRC defines charitable purposes as carrying out the primary purpose of the charity and/or directly serving the beneficiaries of the charity.

Other activities exempt from Corporation Tax include:

agricultural exhibitions or shows if the agricultural society that's running them uses any profits solely for the purposes of the society

the sale of permanent health insurance or sickness insurance by a friendly society

non-commercial activities connected with core health care delivery undertaken by NHS foundation trusts

Corporation Tax rates 

The main rate of Corporation Tax - set at 19%.

Capital Gains Tax

Capital gains form part of a company’s taxable profits. Gains (or losses) on the disposal of substantial shareholdings in both UK and foreign companies can be exempt. The main conditions, broadly, require the selling company to have continuously owned at least 10% of the shares of the company being sold for at least 12 of the 24 months before disposal and the selling company/company being sold must be trading or members of a trading group (without, to a substantial extent, any non-trading activities) for at least 12 months before disposal (in some cases this may have to be 24 months) and immediately after the disposal. When an election has been made to exclude the profits of PEs, the exclusion also may apply to gains and losses of certain capital assets of the PE, unless the company is a close company. A nonresident company generally is not subject to tax on its capital gains unless the asset is held through a UK PE.

A capital gains tax charge was introduced from April 2013 for nonresident companies and certain other vehicles disposing of UK residential property valued at more than GBP 2 million. Exemptions from this charge are available in various circumstances (broadly, where the property is not being used as a residence of shareholder owning 5% or more of the company).

Dividends

A dividend exemption applies to most dividends (and distributions) unless received by a bank, insurance company or other financial trader. Dividends received by a non-small UK company on most ordinary shares and many dividends on nonordinary shares from another company (UK or foreign) are exempt from UK corporation tax, with no minimum ownership period level. The exemption also can apply to small companies receiving dividends (and distributions) from UK companies or foreign companies resident in a jurisdiction that has concluded a tax treaty with the UK that includes a nondiscrimination provision.

Losses

Trading losses generally can offset total profits of the year (including capital gains), with carryback of the excess to the preceding year permitted. Trading losses may be carried forward indefinitely (unless there is a change of ownership of the company and a major change in the nature and conduct of the trade within three years), but can be offset only against trading income. Capital losses may be offset only against capital gains and may only be carried forward.

Tax Year

For Corporation Tax, the tax year is called the 'financial year' or 'fiscal year' and runs from 1 April to 31 March. This is different from the tax year for individual taxpayers, which runs from 6 April to 5 April.

Your company or organisation pays Corporation Tax on taxable profits for each Corporation Tax accounting period, which is normally 12 months long and normally matches your company's financial year. However, certain events or changes of circumstances can cause accounting periods to change. You cannot choose your Corporation Tax accounting period.

Corporation Tax Self Assessment

Corporation Tax Self Assessment means that it's up to you (rather than HMRC) to work out how much Corporation Tax your company or organisation must pay for each Corporation Tax accounting period. You do this by filing your Company Tax Return to HMRC.

Corporation Tax Filing and Payment 

Unlike other taxes such as Income Tax or VAT - where in most cases the filing and payment deadlines are identical - this is not the case with Corporation Tax. The deadline to pay your Corporation Tax is before the deadline to file your Company Tax Return. Generally you must:

pay by 9 months and one day after the end of your company or organisation's Corporation Tax accounting period

file by 12 months after the end of your company or organisation's Corporation Tax accounting period

For example, if your company or organisation's financial year runs from 1 April 2011 to 31 March 2012, and your Corporation Tax accounting period is the same, you must:

pay your Corporation Tax for that period by 1 January 2013

file your Company Tax Return for that period by 31 March 2013

If your company's profits for an accounting period are at an annual rate of more than £1.5 million, you must normally pay your Corporation Tax for that period in instalments, all of which are due before the deadline to file your Company Tax Return.

You can deal directly with HMRC or you can appoint someone to deal with HMRC on your behalf for your Corporation Tax affairs. This is known as appointing an agent.

Withholding Tax

Dividends: there typically is no withholding tax on dividends paid by UK companies under domestic law, although a 20% withholding tax generally applies to distributions paid by a REIT form its tax-exempt rental profits (subject to relief under a tax treaty).

Interest: interest paid to a nonresident is subject to a 20% withholding tax, unless the rate is reduced under a tax treaty or the interest is exempt under the EU interest and royalties directive. Reduction under a tax treaty is not automatic and advance clearance must be granted by the UK tax authorities.

Royalties: royalties paid to a nonresident are subject to a 20% withholding tax, unless the rate is reduced under a tax treaty or the royalties are exempt under the EU interest and royalties directive. Advance clearance is not required to apply a reduced treaty rate.

Technical service fees: no

Branch remittance tax: no

VAT

VAT is a tax that's charged on most goods and services that VAT-registered businesses provide in the UK. It's also charged on goods and some services that are imported from countries outside the European Union (EU), and brought into the UK from other EU countries.

VAT is charged when a VAT-registered business sells to either another business or to a non-business customer.

When VAT-registered businesses buy goods or services they can generally reclaim the VAT they've paid.

There are three rates of VAT, depending on the goods or services the business provides. The rates are:

standard - 20 per cent

reduced - 5 per cent

zero - 0 per cent

There are also some goods and services that are exempt from VAT or outside the UK VAT system altogether.

Examples of reduced-rated items

These are some examples of goods and services that may be reduced-rated, depending on the product itself and the circumstances of the sale:

domestic fuel and power

installing energy-saving materials

sanitary hygiene products

children's car seats

This isn't a complete list of reduced-rated items and services.

Examples of zero-rated items

These are examples of goods and services that may be zero-rated, depending on the product itself and the circumstances of the sale:

food - but not meals in restaurants or hot takeaways

books and newspapers

children's clothes and shoes

public transport

This isn't a full list of zero-rated items.

Exempt items 

Some items are exempt from VAT because the law says they mustn't have any VAT charged on them. Items that are exempt include the following:

insurance

providing credit

education and training, if certain conditions are met

fundraising events by charities, if certain conditions are met

membership subscriptions, if certain conditions are met

most services provided by doctors and dentists

Selling, leasing and letting commercial land and buildings are also exempt from VAT. But you can choose - or 'opt' - to give up the right to the exemption and to charge VAT at the standard rate instead. This allows you to reclaim input tax when otherwise you wouldn't be able to.

Outside the scope of VAT

There are some things that aren't in the UK VAT system at all - they're outside the scope of VAT. They are not taxable supplies and no VAT is charged on them. Items that are outside the scope of VAT include:

non-business activities like a hobby - for example, you might sell some stamps from your collection

fees that are fixed by law - known as 'statutory fees' - for example the congestion charge or vehicle MoT tests

VAT Registration

Registration is compulsory for businesses whose taxable supplies exceed £81,000 (for 2014/15) in any given year or where a business expects that its taxable supplies will exceed this threshold within the next 30 days. 

Voluntary registration is possible for businesses making taxable supplies below this threshold. Deregistration is possible if taxable supplies fall below £79,000. If a business does not have a place of business in the UK, the registration threshold does not apply. The registration date will be the earlier of the date the business makes taxable supplies in the UK or the date the business expects it will make taxable supplies in the next 30 days.

VAT Tax Period and Returns

VAT return are usually due on a quarterly basis (taxable persons are allocated one of three VAT return periods). A taxable person also may be allowed to complete returns on a monthly basis.

If the VAT return is not filed by the due date or the VAT due is not paid, a taxable person may be liable to a surcharge.

Stamp Duty

Stamp duty is levied on the transfer of UK shares at 0.5% rate, payable by the transferee.

Stamp Duty Land Tax is charged on transfers of UK real property. For residential property, the rates are between 0% and 7%, depending on the value of property. The rates for nonresidential property are 0% to 4%. A 15% rate applies to purchases of residential property valued at more than GBP 2 million by companies and certain other vehicles.

In certain cases, transfers within a tax group may be free from stamp duty.

Other Taxes and Duties

Real property tax	The national nondomestic rate is payable by individual occupiers of business premises. Local authorities collect the tax by charging a uniform business rate, which is deductible in computing taxable income.
Inheritance/estate tax	Inheritance tax is charged on property passing on death, certain gifts made within seven years of death and some lifetime transfers (e.g. to a discretionary trust). Where due, inheritance tax is payable on assets in excess of GBP 325,000 (2013/14 and 2014/15) at a rate of 40% (20% for certain lifetime transfers). Transfers between spouses, in lifetime or upon death, generally are exempt from inheritance tax unless only the donor spouse has a UK domicile. For nondomiciled individuals, only UK property is subject to inheritance tax, although long-term residence can result in deemed UK domicile (for inheritance tax purposes only) once an individual has been UK-resident in 17 out of the last 20 tax years.
Social security contribution	National Insurance Contributions (NIC) are payable by employers, employees and self-employed individuals. For example, for 2013/14, weekly paid employees pay NIC at a rate of 12% on weekly income between GBP 149 and GBP 797 and 2% on income exceeding this amount. For employers, NIC is payable at a rate of 13.8% on all income in excess of GBP 148 per week (for 2013/14).

Anti-Avoidance Rules

Transfer pricing: Comprehensive transfer pricing provisions apply to transactions with both domestic and foreign companies. The UK transfer pricing rules follow OECD principles. This includes a requirement to prepare documentation to demonstrate compliance with the arm’s length standard. Advance pricing agreements are possible in certain situations.

Thin capitalization: The arm’s length principle applies. There are no safe harbor provisions. Advance thin capitalization agreements are available.

Controlled foreign companies: CFC provisions are applicable where, broadly, a UK company has a interest (direct or indirect) of at least 25% in a nonresident company that is controlled by UK residents. New rules apply for accounting periods beginning on or after 1 January 2013, which are more specifically targeted at situations where profits have been artificially diverted from the UK. The regime operates on an income stream basis and there is a “gateway” test and a number of provisions that may apply to exempt a company from the rules. Where the CFC rules do apply, the relevant profits of the CFC are computed as though it were UK resident and its UK shareholder is subject to tax accordingly. In addition, an overseas finance company can be fully or partially exempt from a CFC charge on profits derived from certain overseas group financing arrangements. The partial exemption works by taxing 25% of the finance company profits at the main corporate tax rate (which will result in an effective rate of 5.75%, based on the main rate of 23% that is effective until 1 April 2014).

Other rules: There are many specific anti-avoidance rules. A general anti-abuse rule (GAAR) applies for arrangements entered into on or after 7 July 2014. The GAAR applies across a wide range of taxes, including corporation tax, income tax, capital gains tax and stamp duty. The legislation gives the UK tax authorities power to potentially apply the GAAR to counteract tax advantages arising from tax arrangements that are abusive.

Disclosure requirements: Certain tax arrangements that result in a UK tax advantage and fall within prescribed hall marks must be disclosed to the UK tax authorities by, for example, a promoter, and the user must note the use of such arrangements on the tax return. Separately, certain transactions valued at more than GBP 100 million, involving, for example, the issue of shares or debentures by, or the transfer or permitting the transfer of shares or debentures of, a foreign subsidiary of a UK company, also have to be reported to the UK tax authorities within 6 months of the transaction. There is a list of excluded transactions that do not need to be reported. 

The UK has exchange of information relationships with 146 jurisdictions through:

129 DTC: Albania, Algeria, Argentina, Armenia, Australia, Austria, Azerbaijan, Bahrain, Bangladesh, Barbados, Belarus, Belgium, Belize, Bolivia, Bosnia and Herzegovina, Botswana, Brunei Darussalam, Bulgaria, Canada, Cayman Islands, Chile, China, Colombia, Croatia, Cyprus, Czech Republic, Côte d'Ivoire, Denmark, Egypt, Estonia, Ethiopia, Falkland Islands (Malvinas), Faroe Islands, Fiji, Finland, Former Yugoslav Republic of Macedonia, France, Gambia, Georgia, Germany, Ghana, Greece, Grenada, Guernsey, Guyana, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Israel, Italy, Jamaica, Japan, Jersey, Jordan, Kazakhstan, Kenya, Kiribati, Korea (Republic of), Kosovo, Kuwait, Latvia, Lesotho, Libya, Liechtenstein, Lithuania, Luxembourg, Malawi, Malaysia, Malta, Mauritius, Mexico, Moldova (Republic of), Mongolia, Montenegro, Montserrat, Morocco, Myanmar, Namibia, Netherlands, New Zealand, Nigeria, Norway, Oman, Pakistan, Panama, Papua New Guinea, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, Saudi Arabia, Senegal, Serbia, Sierra Leone, Singapore, Slovakia, Slovenia, Solomon Islands, South Africa, Spain, Sri Lanka, Sudan, Swaziland, Sweden, Switzerland, Tajikistan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Tuvalu, Uganda, Ukraine, United Arab Emirates, United States, Uruguay, Uzbekistan, Venezuela, Viet nam, Zambia, Zimbabwe.

26 TIEA: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Belize, Bermuda, Brazil, Curaçao, Dominica, Gibraltar, Grenada, Guernsey, Isle of Man, Jersey, Liberia, Liechtenstein, Macao (China), Marshall Islands, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, San Marino, Sint Maarten, Turks and Caicos Islands, Uruguay, Virgin Islands, British

Foreign exchange control

There are no foreign exchange controls in the UK.

Accounting Records

Do all companies have to keep accounting records?

Yes. Every company, whether or not they are trading, must keep accounting records. 

What must accounting records include? 

Accounting records must in particular contain:

entries showing all money received and expended by the company

a record of the assets and liabilities of the company

Also, where the company’s business involves dealing in goods, the records must contain:

statements of stock held by the company at the end of each financial year

all statements of stock takings from which you have taken or prepared any statements of stock

statement of all goods sold and purchased, other than by ordinary retail trade. This should list the goods, the buyers and sellers

Parent companies must ensure that any subsidiary undertaking keeps sufficient accounting records so that the directors of the parent company can prepare accounts that comply with the Companies Act or International Accounting Standards.

Where must a company keep its accounting records? 

A company must keep its accounting records at its registered office address or a place that the directors think suitable. The records must be open to inspection by the company’s officers at all times.

If the company holds the records at a place outside of the UK, it must send accounts and returns at least every six months and keep them in the UK. Those accounts and returns must disclose the financial position and enable the directors to prepare accounts that comply with the requirements of the Companies Act, including where the accounts are prepared using International Accounting Standards.

How long must a company keep its records? 

Private companies must keep accounting records for 3 years from the date they were made. Public companies must keep them for 6 years.

Accounts

All UK companies must prepare annual accounts reflecting financial state of the company and results of its activity for the given year.

Preparation of Accounts

Who is responsible for preparing accounts?

The directors of every company must prepare accounts for each financial year. These are called individual accounts. A parent company must also prepare group accounts.

What does a set of accounts include? 

Generally, accounts must include:

a profit and loss account (or income and expenditure account if the company is not trading for profit)

a balance sheet signed by a director on behalf of the board and the printed name of that director

notes to the accounts

group accounts (if appropriate)

And accounts must generally be accompanied by:

a directors' report signed by a secretary or director and their printed name, including a business review (or strategic report) if the company does not qualify as small

an auditors' report stating the name of the auditor and signed and dated by him (unless the company is exempt from audit)

What period must the accounts cover? 

A company's first accounts cover the period starting on the date of incorporation, not the first day of trading. They end on the accounting reference date or up to 7 days either side of that date.

Subsequent accounts start on the day after the previous accounts ended and finish on the accounting reference date or up to 7 days either side of it. 

For example, if a company is incorporated on the 6 April 2014 the accounts must cover the entire period of 6 April 2014 – 30 April 2015. Subsequent periods will start on 1 May each year and end on 30 April the following year. 

How is the accounting reference date determined? 

For all new companies, the legislation sets the first accounting reference date as the last day in the month in which its first anniversary falls. The subsequent accounting reference dates will automatically be on the same date each year. For example, if the company was incorporated on 6 April 2008 its first accounting reference date would be 30 April 2009 and 30 April for every year thereafter.

Can I change the accounting reference date? 

Yes, you can change the current or the immediately previous accounting reference period so as to extend or shorten the period. To do this you must notify Companies House of a change of accounting reference date on Form AA01. You must submit an acceptable change of accounting reference date before the filing deadline of the accounts for the period that you wish to change. In other words, if accounts for a particular accounting reference period become overdue, it is too late to change the accounting reference date.

What if a company cannot afford a professional accountant?

There is no requirement for companies to use a professional accountant to prepare their accounts. However, directors should be aware of their legal responsibilities regarding accounts and if they are uncertain about the requirements they may consider seeking professional advice. 

Does every company have to send accounts to members etc?

Every company must send a copy of its annual accounts for each financial year to -

every member of the company

every holder of the company's debentures

every person who is entitled to receive notice of general meetings

Does a company have to lay its accounts before a general meeting?

There is no longer a statutory requirement for private companies to lay their accounts before members at a general meeting. If a private company’s articles currently specify that the company must lay accounts before members at a general meeting, they may pass a special resolution to remove that provision.

Can a company pass a resolution to use a website as way of showing members the accounts? 

Yes. A company may pass a resolution or make provision in its articles that the company may send or supply documents, including accounts, to members by website. Members do not have to agree to receive communications in this way and have the right to request a paper copy.

Who can approve and sign accounts? 

The company's board of directors must approve the accounts before they send them to members etc.

a director must sign the balance sheet on behalf of the board and print their name, with any exemptions statements appearing above the director's signature

a director or the company secretary must sign the directors' report on behalf of the board and print their name. Any statement about its being prepared under the small companies regime must appear above the signature

if the company has to attach an auditor’s report to the accounts, the report must include the auditor’s signature and their name must be printed

Where the auditor is a firm the auditor’s report must state the name of the auditor and the name of the person who signed it as senior statutory auditor on behalf of the firm.

Preparation of Accounts

Who is responsible for preparing accounts?

The directors of every company must prepare accounts for each financial year. These are called individual accounts. A parent company must also prepare group accounts.

What does a set of accounts include? 

Generally, accounts must include:

a profit and loss account (or income and expenditure account if the company is not trading for profit)

a balance sheet signed by a director on behalf of the board and the printed name of that director

notes to the accounts

group accounts (if appropriate)

And accounts must generally be accompanied by:

a directors' report signed by a secretary or director and their printed name, including a business review (or strategic report) if the company does not qualify as small

an auditors' report stating the name of the auditor and signed and dated by him (unless the company is exempt from audit)

What period must the accounts cover? 

A company's first accounts cover the period starting on the date of incorporation, not the first day of trading. They end on the accounting reference date or up to 7 days either side of that date.

Subsequent accounts start on the day after the previous accounts ended and finish on the accounting reference date or up to 7 days either side of it. 

For example, if a company is incorporated on the 6 April 2014 the accounts must cover the entire period of 6 April 2014 – 30 April 2015. Subsequent periods will start on 1 May each year and end on 30 April the following year. 

How is the accounting reference date determined? 

For all new companies, the legislation sets the first accounting reference date as the last day in the month in which its first anniversary falls. The subsequent accounting reference dates will automatically be on the same date each year. For example, if the company was incorporated on 6 April 2008 its first accounting reference date would be 30 April 2009 and 30 April for every year thereafter.

Can I change the accounting reference date? 

Yes, you can change the current or the immediately previous accounting reference period so as to extend or shorten the period. To do this you must notify Companies House of a change of accounting reference date on Form AA01. You must submit an acceptable change of accounting reference date before the filing deadline of the accounts for the period that you wish to change. In other words, if accounts for a particular accounting reference period become overdue, it is too late to change the accounting reference date.

What if a company cannot afford a professional accountant?

There is no requirement for companies to use a professional accountant to prepare their accounts. However, directors should be aware of their legal responsibilities regarding accounts and if they are uncertain about the requirements they may consider seeking professional advice. 

Does every company have to send accounts to members etc?

Every company must send a copy of its annual accounts for each financial year to -

every member of the company

every holder of the company's debentures

every person who is entitled to receive notice of general meetings

Filing Accounts

Are the accounts filed with Companies House different to the accounts prepared for the members?

You can simply file a copy of the accounts that you have already prepared for the members/shareholders at Companies House. However small and medium-sized companies may file an abbreviated version of those accounts which has less detail by combining certain items. 

Do all companies have to file their accounts at Companies House? 

All private limited companies must file their accounts at Companies House.

How long do I have to file my company's first accounts?

If you are filing your company's first accounts and those accounts cover a period of more than 12 months, you must deliver them to Companies House:

within 21 months of the date of incorporation for private companies

3 months from the accounting reference date, whichever is longer

The deadline for delivery to Companies House is calculated to the exact day.

For example, a private company incorporated on 1 January 2014 with an accounting reference date of 31 January has until midnight on 1 October 2015 (21 months from the date of incorporation) to deliver its accounts, not 31 October.

How long do I normally have to file my accounts?

Unless you are filing your company's first accounts the time normally allowed for delivering accounts to Companies House is:

9 months from the accounting reference date for a private company

Can I apply for extra time to file?

Yes. If there is a special reason for doing so, you may apply to extend the time for delivering accounts to Companies House; for example, if there has been an unforeseen event which was outside the control of the company and its auditors.

You should make the application in writing and deliver it before the normal filing deadline. It must contain a full explanation of the reasons for the extension and the length of the extension requested. 

What if I deliver the accounts late?

Failure to deliver accounts on time is a criminal offence. In addition, the law imposes a civil penalty for late filing of accounts on the company. The amount of the penalty depends on how late the accounts arrive:

Length of delay	Penalty
Not more than 1 month	£150
More than 1 month but not more than 3 months	£375
More than 3 months but not more than 6 months	£750
More than 6 months	£1500

What if the filing deadline falls on a Sunday or a Bank Holiday?

If a filing deadline falls on a Sunday or Bank Holiday, the law still requires you to file the accounts by that date. To avoid a penalty, please ensure that you send acceptable accounts in time to arrive before the deadline.

It is the date that you deliver acceptable accounts which meet the relevant legal requirements to Companies House that is important, not the date that you sent the accounts.

What if I do not submit accounts to Companies House at all?

If the Registrar believes that a company is no longer carrying on business or in operation, he could strike it off the register and dissolve it. If this happens all the assets of the company, including its bank account and property, generally become the property of the Crown.

Failure to deliver documents is a criminal offence. All the directors of the company risk prosecution. On conviction, a director could end up with a criminal record and a potentially unlimited fine for each offence. This is separate from the civil penalty imposed on the company for late filing of accounts.

Abbreviated Accounts for Micro-Entity

Some kinds of UK companies including micro-entity, small and medium companies, can prepare abbreviated accounts.

A micro-entity must meet at least two of the following conditions:

turnover must be not more than £632,000

the balance sheet total must be not more than £316,000

the average number of employees must be not more than 10

An entity cannot prepare and submit micro-entity accounts if it is, or was at any time during the financial year, one of the following:

a limited liability partnership

a limited partnership

a qualifying partnership as defined under the Partnership (Accounts) Regulations 2008

a public limited company

an overseas company

an unregistered company

a company authorised to register under section 1040 Companies Act 2006

a charitable company

a company that is excluded from the small company’s regime under section 384 Companies Act 2006, or is excluded from being treated as a micro-entity under section 384B Companies Act 2006.

Micro-entity accounts include the following elements:

A balance sheet that complies with one of the specified formats given in the relevant regulations, along with any footnotes

A directors’ report

A profit & loss account that complies with the specified format given in the relevant regulations

An auditors report, unless the company is claiming exemption from audit as a small company

Any notes to the accounts

Micro-entities can prepare and file a balance sheet with a reduced set of information than that required by a small, medium or large company.

Additionally, a micro-entity will be able to benefit from the exemptions available to small companies such as exemption from audit and the requirement to file a directors’ report or profit & loss account at Companies House.

Abbreviated Accounts for Small Company

A small company must meet at least two of the following conditions:

annual turnover must be not more than £6.5 million

the balance sheet total must be not more than £3.26 million

the average number of employees must be not more than 50

A company cannot prepare and submit small company accounts if it is, or was at any time during the financial year, one of the following:

a public company

a member of an ineligible group (see below)

an authorised insurance company, a banking company, an e-money issuer, a MiFID (i.e. Markets in Financial Instruments Directive) investment firm or a UCITS (i.e. Undertakings for Collective Investment in Transferable Securities) management company or carried on insurance market activity

A group is ineligible if any of its members is:

a public company

a body corporate (other than a company) whose shares are admitted to trading on a regulated market in an EEA State

a person (other than a small company) who has permission under Part IV of the Financial Services and Markets Act 2000 to carry on a regulated activity

a small company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID investment firm or a UCITS management company

a person who carries on insurance market activity

Generally, small company accounts include:

a profit and loss account

a full balance sheet, signed by a director on behalf of the board and the printed name of that director

notes to the accounts

group accounts (if a small parent company chooses to prepare them)

And they should be accompanied by:

a directors' report that shows the signature of a secretary or director and their printed name

an auditors report that includes the printed name of the registered auditor (unless the company qualifies for exemption from audit and takes advantage of that exemption)

Small companies can prepare and file simpler, less detailed accounts than those required by large and medium companies.

A small company can file a copy of the accounts which it prepared for its members, or an abbreviated version of those accounts. Small companies do not have to deliver a copy of the directors’ report or the profit and loss account to Companies House.

Audit Medium-Sized Company Accounts 

To be a medium-sized company, you must meet at least two of the following conditions:

annual turnover must be no more than £25.9 million

the balance sheet total must be no more than £12.9 million

the average number of employees must be no more than 250

A company cannot be treated as a medium-sized company if it is, or was at any time during the financial year, one of the following:

a public company

a company that has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity or that carries on an insurance market activity

a member of an ineligible group

A group is ineligible if any of its members is:

a public company

a body corporate (other than a company) whose shares are admitted to trading on a regulated market

a person (other than a small company) who has permission under Part 4 of the Financial Services and Markets Act 2000 to carry on a regulated activity

a small company that is an authorised insurance company, a banking company, an e-money issuer, a MiFID (ie Markets in Financial Instruments Directive) investment firm or a UCITS (ie Undertakings for Collective Investment in Transferable Securities) management company

a person who carries on insurance market activity

Medium-sized accounts must include: a profit and loss account

a balance sheet, showing the printed name and signature of a director

notes to the accounts

group accounts (if appropriate)

And should be accompanied by:

a directors' report including a business review (or strategic report) showing the printed name of the approving secretary or director

an auditor’s report that includes the name of the registered auditor unless the company is exempt from audit

Audit

If UK company is not exempt from audit, its account should be checked by an auditor, and auditors’ report should be attached to the accounts for members and Companies House.

Before the first general meeting directors can appoint the auditor themselves. After that auditors are appointed by the general meeting. Auditor should be a member of an authorized association.

The auditor’s report must include:

an introduction identifying the accounts that were the subject of the audit

a description of the scope of the audit identifying the auditing standards used and the financial reporting framework used in the preparation of the accounts

a statement as to whether in the auditor’s opinion the accounts have been prepared in accordance with the Companies Act 2006 and, where appropriate, in accordance with Article 4 of the EU Regulation on International Accounting Standards, (Regulation (EC)1606/2002, the "IAS Regulation")

a statement as to whether they give a true and fair view of the company’s or (in the case of group accounts) group’s financial affairs

a statement as to whether the directors’ report is consistent with the accounts

if the auditors are of the opinion that the company has not kept adequate accounting records, a statement to that effect

if the company has not provided the auditors with all the information they need to complete the report, a statement to that effect

The auditor’s report must be either unqualified or qualified and include a reference to any matters to which the auditors wish to draw attention by way of emphasis without qualifying the report. The auditors will qualify the report where either there has been a limitation on the scope of the auditors’ work or where there is a material disagreement between the company and the auditors about the accounts.

To qualify for audit exemption, a company must qualify as small in relation to that financial year. In other words it must meet any two of the following:

annual turnover must not be more than £6.5 million

the balance sheet total of not more than £3.26 million

the average number of employee must be not more than 50

You have the same time for filing both audited and audit exempt accounts, and the law imposes the same penalties as for late filing of all other accounts.

Annual Return

Which companies must send an annual return to Companies House?

Every company must deliver an annual return to Companies House at least once every 12 months. The company's director(s) and the secretary (where applicable), are responsible for ensuring that they deliver the annual return to Companies House within 28 days after the anniversary of incorporation of a company or of the anniversary of the made-up date of the last annual return.

If you do not deliver the company’s annual return, the Registrar might assume that the company is no longer carrying on business or in operation and take steps to strike it from the register.

What is an annual return?

An annual return is a snapshot of certain company information at the made-up date. It is a separate document from a company's annual accounts. An annual return must contain the following information:

the name of the company

its registered number

the date to which the annual return is made-up (the made-up date)

the principal business activities of the company

the type of company it is, for example, private or public

the registered office address of the company

the address (single alternate inspection location - SAIL) where the company keeps certain company records if not at the registered office, and those records held there

the details of the company secretary (corporate or individual), where applicable

the details of all the company's directors (corporate or individual)

What is the made-up date?

This is the date at which all the information in an annual return must be correct. The made-up date is usually the anniversary of:

the incorporation of the company, or

the made-up date of the previous annual return registered at Companies House

Is there a fee for filing the annual return?

Yes. There is an annual document-processing fee of £40 for paper documents or £13 for users of our Software Filing or WebFiling services which is payable when you file the annual return. Companies that file a paper annual return should make the cheque payable to 'Companies House' and write the company number on the reverse.

Tax Returns

Unlike other taxes such as Income Tax or VAT - where in most cases the filing and payment deadlines are identical - this is not the case with Corporation Tax. The deadline to pay your Corporation Tax is before the deadline to file your Company Tax Return. Generally you must:

pay by 9 months and one day after the end of your company or organisation's Corporation Tax accounting period

file by 12 months after the end of your company or organisation's Corporation Tax accounting period

For example, if your company or organisation's financial year runs from 1 April 2011 to 31 March 2012, and your Corporation Tax accounting period is the same, you must:

pay your Corporation Tax for that period by 1 January 2013

file your Company Tax Return for that period by 31 March 2013

If your company's profits for an accounting period are at an annual rate of more than £1.5 million, you must normally pay your Corporation Tax for that period in instalments, all of which are due before the deadline to file your Company Tax Return.

Companies are liable to a fixed penalty of GBP 100 for failure to file a tax return by the due date, plus and additional GBP 100 if the return is not submitted within 3 months of the due date. Further penalties may apply to returns filed at least six months late. Tax-geared penalties can be sough for natters such as tax returns that are carelessly or deliberately incorrect, although such penalties can be reduced depending on the taxpayer’s behavior. Interest is paid on late paid tax.