Running a Limited Company

Running a limited company: your responsibilities

1. Directors’ responsibilities

As a director of a limited company, you must:

You can hire other people to manage some of these things day-to-day (for example, an accountant) but you’re still legally responsible for your company’s records, accounts and performance.

You may be fined, prosecuted or disqualified from being a company director if you do not meet your responsibilities.

Contact your professional adviser or trade association to find out more.

2. Taking money out of a limited company

How you take money out of the company depends on what it’s for and how much you take out.

Salary, expenses and benefits

If you want the company to pay you or anyone else a salary, expenses or benefits, you must register the company as an employer.

The company must take Income Tax and National Insurance contributions from your salary payments and pay these to HM Revenue and Customs (HMRC), along with employers’ National Insurance contributions.

If you or one of your employees make personal use of something that belongs to the business, you must report it as a benefit and pay any tax due.

Dividends

A dividend is a payment a company can make to shareholders if it has made a profit.

You cannot count dividends as business costs when you work out your Corporation Tax.

Your company must not pay out more in dividends than its available profits from current and previous financial years.

You must usually pay dividends to all shareholders.

To pay a dividend, you must:

  • hold a directors’ meeting to ‘declare’ the dividend
  • keep minutes of the meeting, even if you’re the only director

Dividend paperwork

For each dividend payment the company makes, you must write up a dividend voucher showing the:

  • date
  • company name
  • names of the shareholders being paid a dividend
  • amount of the dividend

You must give a copy of the voucher to recipients of the dividend and keep a copy for your company’s records.

Tax on dividends

Your company does not need to pay tax on dividend payments. But shareholders may have to pay Income Tax if they’re over £2,000. Please refer to the tab – Dividends, Distributing and dividend tax rates for further clarification

Directors’ loans

If you take more money out of a company than you’ve put in – and it’s not salary or dividend – it’s called a ‘directors’ loan’.

If your company makes directors’ loans, you must keep records of them. There are also some detailed tax rules about how directors’ loans are handled.

3. Company changes you must report

You must report certain changes to Companies House.

Changing your company’s registered office address

You must tell Companies House if you want to change your company’s registered office address. If the change is approved, they will tell HM Revenue and Customs (HMRC).

Your company’s new registered office address must be in the same part of the UK that the company was registered (incorporated).

For example, if your company was registered in England and Wales, the new registered office address must be in England or Wales.

Your address will not officially change until Companies House has registered it.

Other changes you must report

You must tell HMRC if:

You must tell Companies House within 14 days if you make changes to:

  • the address where you keep your records, and which records you keep there
  • directors or their personal details, like their address
  • ‘people with significant control’ (PSC), or their personal details like a new address
  • company secretaries (appointing a new one or ending an existing one’s appointment)

You must tell Companies House within a month if you issue more shares in your company.

How to report changes to Companies House

You can:

Changes that shareholders must approve

You may need to get shareholders to vote on the decision if you want to:

  • change the company name
  • remove a director
  • change the company’s articles of association

This is called ‘passing a resolution’. Most resolutions will need a majority to agree (called an ‘ordinary resolution’). Some might require a 75% majority (called a ‘special resolution’).

Companies House has more details about the types of changes and resolutions you must report to them.

Your new company name will not take effect until it’s registered by Companies House – they’ll tell you when this happens.

Shareholder voting

When you’re working out whether you have a majority, count the number of shares that give the owner the right to vote, rather than the number of shareholders.

You do not necessarily need to have a meeting of shareholders to pass a resolution. If the right amount of shareholders have told you they agree, you can confirm the resolution in writing. But you must write to all shareholders letting them know about the decision.

4. Company and accounting records

You must keep:

  • records about the company itself
  • financial and accounting records

You can hire a professional (for example, an accountant) to help with your tax.

HM Revenue and Customs (HMRC) may check your records with a compliance check to make sure you’re paying the right amount of tax.

Records about the company

You must keep details of:

  • directors, shareholders and company secretaries
  • the results of any shareholder votes and resolutions
  • promises for the company to repay loans at a specific date in the future (‘debentures’) and who they must be paid back to
  • promises the company makes for payments if something goes wrong and it’s the company’s fault (‘indemnities’)
  • transactions when someone buys shares in the company
  • loans or mortgages secured against the company’s assets

You must tell Companies House if you keep the records somewhere other than the company’s registered office address.

Register of ‘people with significant control’

You must also keep a register of ‘people with significant control’ (PSC). Your PSC register must include details of anyone who:

  • has more than 25% shares or voting rights in your company
  • can appoint or remove a majority of directors
  • can influence or control your company or trust

You still need to keep a record if there are no people with significant control.

Read more guidance on keeping a PSC register if your company’s ownership and control is not simple.

Accounting records

You must keep accounting records that include:

  • all money received and spent by the company, including grants and payments from coronavirus (COVID-19) support schemes
  • details of assets owned by the company
  • debts the company owes or is owed
  • stock the company owns at the end of the financial year
  • the stocktakings you used to work out the stock figure
  • all goods bought and sold
  • who you bought and sold them to and from (unless you run a retail business)

You must also keep any other financial records, information and calculations you need to prepare and file your annual accounts and Company Tax Return. This includes records of:

  • all money spent by the company, for example receipts, petty cash books, orders and delivery notes
  • all money received by the company, for example invoices, contracts, sales books and till rolls
  • any other relevant documents, for example bank statements and correspondence

You can be fined £3,000 by HMRC or disqualified as a company director if you do not keep accounting records.

How long to keep records

You must keep records for 6 years from the end of the last company financial year they relate to, or longer if:

  • they show a transaction that covers more than one of the company’s accounting periods
  • the company has bought something that it expects to last more than 6 years, like equipment or machinery
  • you sent your Company Tax Return late
  • HMRC has started a compliance check into your Company Tax Return

If your records are lost, stolen or destroyed

If you cannot replace your records after they were lost, stolen or destroyed you must:

5. Confirmation statement

You need to check that the information Companies House has about your company is correct every year. This is called a confirmation statement.

Check your company’s details

You need to check the following:

Check the Companies House register.

Send your confirmation statement

Send your confirmation statement online or by post. It costs £13 to file your confirmation statement online, and £40 by post.

If you need to report changes

You can report changes to your statement of capital, shareholder information and SIC codes at the same time.

You cannot use the confirmation statement to report changes to:

  • your company’s officers
  • the registered office address
  • the address where you keep your records
  • people with significant control

You must file those changes separately with Companies House.

When it’s due

Your confirmation statement is due usually a year after either:

  • the date your company incorporated
  • the date you filed your last confirmation statement

You can file your confirmation statement up to 14 days after the due date.

Sign up to get an email reminder when your confirmation statement is due.

You can be fined up to £5,000 and your company may be struck off if you do not send your confirmation statement.

6. Signs, stationery and promotional material

Signs

You must display a sign showing your company name at your registered company address and wherever your business operates. If you’re running your business from home, you do not need to display a sign there.

Example

If you’re running 3 shops and an office that’s not at your home, you must display a sign at each of them.

The sign must be easy to read and to see at any time, not just when you’re open.

Stationery and promotional material

You must include your company’s name on all company documents, publicity and letters.

On business letters, order forms and websites, you must show:

  • the company’s registered number
  • its registered office address
  • where the company is registered (England and Wales, Scotland or Northern Ireland)
  • the fact that it’s a limited company (usually by spelling out the company’s full name including ‘Limited’ or ‘Ltd’)

If you want to include directors’ names, you must list all of them.

If you want to show your company’s share capital (how much the shares were worth when you issued them), you must say how much is ‘paid up’ (owned by shareholders).

There are different rules for what you need to include on invoices.

Limited company annual accounts – when are they due?

Every limited company must submit accounts to HMRC and Companies House each financial year. In this article, we look at what statutory accounts are, and how to work out your filing deadlines.

If you are a limited company director, one of your legal obligations is to ensure that your company’s annual accounts are submitted to HMRC and Companies House accurately and on time.


When are my annual accounts due?


When you first incorporate, your Annual Reference Date (ARD) is set to the end of the month in which you set up your limited company. So, if you formed your company on 12th January 2018, your ARD would fall on the 31st of January each year.
Under typical circumstances, you must ensure that you submit your company annual accounts to Companies House within 9 months.
However, the first time you submit your company accounts to Companies House, you must do so within 21 months of the date of incorporation rather than the ARD.


You must send a copy of your statutory accounts to:
• HMRC (as part of your Company Tax Return)
• Companies House
• All shareholders
• Anyone who attends an Annual General Meeting (AGM)
What do the annual accounts consist of?
The complexity of the accounting documents you need to submit depends on the size of your company. Most small companies are defined as ‘micro entities’, and as a result, the reporting requirements are far less complex than they are for larger firms.


Statutory accounts – to be submitted to HMRC


The statutory requirements for annual accounts – to be delivered to HMRC – include:
• Balance sheet
• Profit and loss account (P&L)
• Notes relating to the accounts
• Directors’ report
• An auditor’s report (not required for small companies or micro entities)
• Signature and name of director(s)

Accounting information to be submitted to Companies House for Micro Entity

Importantly, micro entity companies can choose to submit simplified accounts to Companies House, and the accounts themselves do not need to be audited.

  • This minimises the amount of financial information that is displayed on the public record. You will not need to submit the P&L or directors’ reports to Companies House – just the balance sheet. Signature and name of director(s)

Is my company a micro entity?

Your reporting requirements are reduced if your business is defined as a ‘small company’, and reduced even further if it is defined as a micro entity.

Your company is a micro-entity if it meets 2 or more of these 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

Find out exactly what your company’s accounting requirements are via this comprehensive official guidance.

Can I change the Annual Reference Date?

You, or your small business accountant, can change the Annual Reference Date online via Companies House Form AA01.

The rules for changing the ARD are complex, so you should always take professional advice before making any changes, and you can’t make changes if the accounts for the current accounting period are overdue.

In general, you cannot extend your company accounting period for longer than 18 months, and can only extend your Annual Reference Date once every five years.

For more information on changing your ARD, or on submitting your annual company accounts in general, refer to this Companies House guide.

What about HMRC and Corporation Tax?

All limited companies must also complete a Corporation Tax return (CT600) each year. Your company statutory accounts must also be attached to this return.

Your annual accounts must be submitted within one year of your company’s year-end, although – confusingly – your Corporation Tax liability must be paid within nine months of this date.

As a result, your accountant will typically submit your accounts in advance of the nine-month deadline for obvious reasons.

You can read more in our Corporation Tax guide for small companies.

What happens if I submit my annual accounts late?

This should never happen, assuming you have a decent accountant and have provided the accountant with all of the necessary accounting information before the deadline.

If for some reason, your annual accounts are delivered late to Companies House, an immediate £150 penalty will apply. The amount increases every few months and reaches £1,500 if your accounts are 6 months late. Find out more here.

If you also deliver your Company Tax Return late to HMRC, a separate set of penalties will apply, starting at £100. After 3 months, a further £100 penalty applies, and after 6 months, HMRC will estimate your Corporation Tax bill + apply a 10% tax penalty. If your Return remains overdue after 12 months, HMRC will charge you an extra 10% of your outstanding bill.

In both cases, penalties are increased for repeat offenders, so make sure you meet the deadlines!

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