A number of important decisions must be made when a company is set-up; for example, who will own shares in the company and to what date will it make up its accounts? These decisions may have tax consequences and it is important that all of the available options are considered. The company must be registered with Companies House and HMRC, and it has an ongoing responsibility to file accounts, submit tax returns and pay any tax due. Penalties may be charged where the company fails to meet, or is late in meeting its obligations.
To set up the company, you will need to do the following:
| Choose a name for the company |
| A key point to bear in mind is that the name must not already be in use; you can search the Companies House Register to check this. Other rules include that the name must end in Limited or Ltd (or the Welsh equivalents); it can’t be offensive and it must not contain a sensitive word or expression (eg ‘Accredited’). It is possible to have a trading name that is different to the company’s name. For further guidance, see GOV.UK. |
| Choose an address for the company |
| This is where official correspondence will be sent and it must be in the UK. This can be a home address but be aware that the company’s address is publicly available information. GOV.UK |
| Choose at least one director |
| A company has to have at least one director and some restrictions apply: the individual must be at least 16 years of age and must not be disqualified from being a director. This is not a decision to be taken lightly as the director is legally responsible for running the company (see the ICAEW’s Guide to directors’ responsibilities; it may be a good idea to direct the client to this publication to help them fully understand what they are taking on). Further, the director’s name and service address is publicly available. GOV.UK |
| Decide on the share capital of the company and who will own the issued share capital |
| The company must have at least one shareholder and it is common to keep the value of shares low to limit the shareholder’s liability; for example, issue 1 £1 Ordinary share where there is to be one shareholder. Share capital and share ownership is important for tax purposes; for example, with regard to the payment of dividends.Therefore, it important to give this due consideration. GOV.UK |
| Work out what the company’s SIC code is |
| This identifies the nature of the company’s business. You can provide up to 4 codes. You can search this database. |
| Set up the company’s Memorandum of Association and Articles of Association |
| The Memorandum of Association is a document signed by all shareholders and the Articles of Association sets out the company’s rules. There is a pro forma Memorandum of Association and standard articles on GOV.UK. When applying online, it is assumed that the company wishes to use the model articles. |
| Identify all persons with significant control (PSCs) over the company |
| Companies are required to identify and record the people who own or control them. Personal details of the PSCs, including name and date of birth, will be publicly available. GOV.UK |
Registering the company with HMRC
Once you have registered the company with Companies House, you need to register it with HMRC for corporation tax. You can do this online.
First, you must have the company’s 10-digit Unique Taxpayer Reference (UTR). HMRC will send this to the company within a few days of the company being registered with Companies House.
To register the company with HMRC, you will need to inform HMRC of:
- the company’s UTR;
- the date on which trading commenced; and
- the date to which the company will prepare its accounts.
You have 3 months from the date trading began to inform HMRC.
HMRC are of the opinion that all directors must register for Self Assessment. Non-director shareholders who expect to be in receipt of dividends should also consider if they need to register for Self Assessment. It is possible to register online.
We can help with all of your business and personal tax and financial planning needs. For a strategic review of your finances, please contact us.
Disclaimer: We don’t take any responsibility for actions taken based on above information. Please speak to our consultants if you need more information. This guide was written specifically for Smart Accounting clients. Some of the information contained in this guide might not be applicable if you do not have a business managed by Smart Accounting. By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details are correct at time of writing.