Key accounting considerations when establishing a company in the UK

Legal

You have made the decision to incorporate a limited company in the UK and you now need to understand the legal and reporting requirements for your company each year.  Failure to meet the reporting requirements can result in penalties, disqualification as directors or even the limited company being struck off the register at Companies House.

Know your reporting requirements

Statutory accounts

A limited company ordinarily needs to file statutory accounts at Companies House within 9 months of the end of the company’s financial year*.  A copy of the full accounts must also be sent to each shareholder member.

The accounts are required to be prepared under relevant UK GAAP (Generally Accepted Accounting Practice) applicable to the entity, which will depend on factors such as; turnover, assets and number of employees.

Most UK companies report under Financial Reporting Standard FRS 102, FRS 102 1A or FRS 105 (micro-entity), but can also report under FRS 100, FRS 101 or IFRS.  Dixcart can guide you as to which standard is appropriate for your limited company.

If your company reaches the audit thresholds, or if is part of a group, the accounts may need to be audited.  A standalone company may qualify for audit exemption if it has at least 2 of the following:

  • an annual turnover of no more than £10.2 million
  • assets worth no more than £5.1 million
  • 50 or fewer employees on average

A full set of accounts would normally include:

  • A balance sheet
  • A profit and loss account
  • Notes about the balance sheet and profit and loss account
  • A directors’ report

Dixcart can help with the preparation of the relevant annual statutory accounts from your bookkeeping records, the audit (if required) and submission of the statutory accounts to Companies House.

*the filing deadlines can change in the event of a change of accounting year end or for the first period.

Corporation Tax Returns

A limited company is also required to submit a corporation tax return to HM Revenue & Customs [HMRC] each year and pay corporation tax if it is due.

The corporation tax return mut be submitted within 12 months of the accounting year end, but if corporation tax is due this needs to be paid within 9 months and 1 day of the accounting year end.

Corporation tax is currently charged at 25% if your company makes profit in excess of £250,000, 19% for profit of £50,000 or less, or you may be entitled to marginal relief if your profits are between £50,000 and £250,000.

Dixcart can help with the preparation of tax computations and reducing your liability where possible, advising you on tax liabilities due and submitting the Corporation Tax Returns to HMRC.

Companies House requirements

Not only do limited companies need to submit statutory accounts to Companies House each year, they are also required to complete an annual Confirmation Statement, which includes a Statement of Persons of Significant Control – the person or entity which controls the business.

Directors are also obliged to inform Companies House of any changes to the company, for example, changes in directorships, share capital, share ownership, registered office address, to name a few.

VAT

If your company makes taxable supplies, you may be required to submit VAT returns.

Currently if your taxable supply turnover reaches the VAT threshold of £85,000, you will be required to submit VAT returns.

Usually VAT returns are submitted quarterly, and all new businesses are automatically signed up for Making Tax Digital for VAT.  Essentially this means that the digital accounting records need to be kept, to enable the submission of the VAT returns.

There are various accounting schemes such as; the flat rate scheme, cash accounting scheme or annual accounting scheme that could be applicable, but Dixcart can advise you here.

Other

If you are running a limited company in the UK, there are other potential reporting requirements that may be applicable to you.  For example:

  • Payroll – if you employ workers in the UK, you may be required to submit Real Time Information (RTI) payroll reports to HM Revenue & Customs each month.
  • P11Ds – if you provide your employees with benefits such as cars or health insurance, these may need to be reported annually to HM Revenue & Customs
  • Annual Tax on Enveloped Dwellings (ATED) – if your limited company owns UK residential property, you may be required to submit an ATED return to HM Revenue & Customs
  • Employee Related Securities Return (ERS) – if your company offers employees share options or shares, you may be required to make an annual return submission.

Running the business – day to day

Bookkeeping

There are many software packages out there to assist with setting up and running your business and will ensure you are Making Tax Digital compliant.  We recommend and partner with Xero online accounting software.  You can either use Xero yourself or we can do this for you, so you can concentrate on growing your business.

Xero automates tasks that used to take up a lot of time. From reconciling bank transactions to sending invoice reminders, it works for you.  Data is protected and stored in one place so it’s easy to see how business is tracking with analytics and to collaborate with your accountant.

  • Everything in one place – See all your invoices, contacts, balances, financial information and accounts online.
  • Connect to your bank – Easily and automatically sync your bank with your financials in Xero online accounting, for easy reconciliation. Xero supports multi-currency businesses too
  • Collaborate online in real time – Invite your advisor to work with you on the online accounts anywhere, anytime
  • Customise to suit your needs – Make Xero your own by connecting other apps to the Xero accounting software.  

And to make Xero work even better for you, we also recommend Dext digital receipt management.

Dext connects seamlessly with the world’s leading accounting software, including Xero, and can help your business automate everyday financial operations, giving you the platform to grow.

Simplify your business accounting process by publishing your sales and business expenses paperwork, such as invoices and receipts, into Dext.

  • Simply snap a picture of your receipt with the Dext app and all the data you need is instantly extracted with market-leading accuracy
  • Submit documents via email, drag & drop, bank fetch – to name just a few ways you can drip-feed invoices and receipts whenever you need
  • Publish your receipts and business expenses straight into your accounting software automatically and keep them safely stored
  • Save time and improve the accuracy of your records with Dext’s expense and invoice management software
  • Quickly create and approve expense reports and set rules to automatically categorise new ones as they come in
  • Have a full overview of your performance with real-time data and make your business more efficient.

Our team at Dixcart can assist you with the above, by taking it all off your hands or alternatively, you can choose how much to want to do yourself with our help along the way, be it implementing, training, maintaining and online filings, as necessary.  

Payroll

Payroll in in the UK is the process of paying employees and collecting taxes from their salaries.  The main taxes are Income Tax and National Insurance, which are paid via the Pay As You Earn (PAYE) system.  Employers need to register as an employer with HMRC, and will need to use HMRC recognised payroll software to manage their PAYE payments and deductions.  Real-Time information (RTI) is the system the UK uses to report payroll information.  Under RTI, employers have to report their payroll data to HMRC online.

Some additional steps for running payroll in the UK are:

  • Record the pay of each employee, including salary, wages and any other pay
  • Calculate deductions from their pay, such as tax, National Insurance, student loan repayments, pension contributions, etc.
  • Report their pay and deductions to HMRC on or before each payday using a Full Payment Submission (FPS)
  • Pay HMRC the tax and National Insurance you owe by the 22nd (or the 19th if paying by post) of the next tax month
  • Consider pension obligations under auto-enrolment – a UK government initiative to automatically enrol qualifying employees into a workplace pension scheme.

We can help you register and set up a payroll (and pension) scheme, run your payroll on our compliant software, and assist you with your legal and filing obligations relating to payroll and pension contributions.

All UK employees should have contracts of employment, and our team at Dixcart Legal can assist with advising on and drafting those and dealing with other employment related legal matters.

Company Secretarial

Corporate identity theft is a major problem for UK incorporated businesses.  Companies House reports around 50 to 100 cases every month, but of course cannot quantify those it has not discovered.

Company identity theft or company hijacking can involve:

  • Changing the registered office. Fraudsters file a form to change the company’s registered office to an alternative address. Once this is done any communications from Companies House will be sent to the company at the new registered office.
  • Changing the officers. Fraudsters file forms to notify Companies House of the appointment of one or more officers of their own. At the same time they will notify Companies House that the company’s true officers have all resigned.
  • Obtaining company documentation. Once these notifications have been registered at Companies House the fraudsters are now effectively in control of the company. In order to give credibility in their subsequent dealings with third-parties the fraudsters may request a Certificate of Good Standing from Companies House. This official document confirms the status of the individuals as being the company’s officers.

The company itself may not discover the changes at Companies House until the fraudsters have obtained goods or services using the stolen company identity and vanished, leaving the company with substantial debts.

As a deterrent, Companies House offer a free service called the ‘Protected Online Filing (PROOF)’ scheme.  By signing up to this service certain filings, including changes to the registered office address, officer details and company name, can only be submitted online using an authentication code provided to the company.

At Dixcart we are also continuously seeking to develop our services in the best interests of our clients, recognising that often they do not wish their home address to be disclosed on the company’s public record.  We have therefore created a comprehensive company secretarial package, being the Company Secretarial and Identity Assurance Service, which includes:

  1. Providing our address as the registered office
  2. Providing our address as the officers’ and people with significant control service address
  3. Filing the annual confirmation statement at Companies House
  4. Filing the statutory accounts at Companies House
  5. Maintaining the statutory registers of the company
  6. Companies House monitoring service – as an alternative to the PROOF scheme, we receive notification of all filings made at Companies House for the company and will advise the officers of any filings that we have not been submitted on their behalf.

How we can help you

Dixcart UK provides solutions and assistance to the business community in the UK and worldwide. 

We can:

  • Assist with incorporating your business
  • Assist with tax compliance and planning, including the aspects of UK tax covered in this note
  • Offer bookkeeping, accounting and auditing services
  • Offer employment and payroll advice and compliance
  • Provide immigration advice, if you are looking to relocate yourself or staff to the UK
  • Support all of the accounting and company secretarial activities of running a business
  • Advise in relation to commercial legal matters including contractual matters and commercial property.

Further Information

If you have any questions regarding the above, or require any assistance, please do not hesitate to contact us at: hello@dixcartuk.com

The information provided within this document is for general informational purposes only. While every effort has been made to ensure its accuracy, no responsibility can be accepted for inaccuracies. Readers are advised that laws and practices may change over time. This document is provided solely for informational purposes and does not constitute accounting, legal, or tax advice. Professional advice should be sought before making any decisions based on the contents of this document.