A Guide to Keeping Company Records

The quantity and variety of records that a limited company must keep to remain compliant with Companies House and HMRC requirements can be overwhelming even for experienced business owners. Thankfully, the following article outlines exactly what records must be kept, where they should be kept, and for how long.

Which Records Do I need to Keep?

Documents relating to the legal entity:

– Certificate of Incorporation

Memorandum and Articles of Association

– Share certificates

Documents relating to company officers:

– Contracts relating to purchase of own shares

– Directors’ indemnities – security against liability claims or legal costs

– Directors’ service contracts

– Documents relating to the redemption or purchase of own shares out of capital by private company

– Instruments creating charges and register of charges. For example, mortgages or secured loans.

– Records of resolutions and minutes of meetings

– Register of Directors

– Register of Members (shareholders/guarantors)

– Register of Secretaries

– Register of People with Significant Control (PSC register)

The following accounting records must also be kept:

– All company assets, liabilities, and credits

– All types of income and expenditure

– Business and VAT records (If VAT registered)

– Company goods and services bought and sold

– Details of those from whom goods and services were purchased and sold (excluding retail sales)

– Inventory of all stock and assets owned at the end of each financial year

– Pay-As-You-Earn (PAYE) records (employer-registered companies only)

– The stock reductions used to calculate the inventory figures

Where Should I Keep My Records?

When a company is incorporated Companies House will by default assume that all records and registered will be stored at the company’s registered office address.

If it is not possible to hold the records at the company’s registered office address it is possible to register a separate address as the Single Alternative Inspection Location (SAIL) address. You must inform Companies House when any documents are held at the SAIL address and detail exactly records are being held there. This information must also be confirmed when your annual confirmation statement is filed.

How Long Do I Need to Keep My Records?

Company registers must be kept permanently whilst records of accounts must be maintained for at least six years from the end of the relative financial year. Minutes of meetings and company resolutions should be kept for at least 10 years from the date of the relative meeting per The Companies Act 2006.

Most limited company records can be maintained digitally however the following records must be kept in their original form:

– Bank interest certificates

– Construction Industry Scheme (CIS)

– Dividend vouchers

Who can Inspect my Records?

Companies are required to make their records available to be inspected on any working day. The public are entitled to inspect a company’s statutory records so long as it is for a “proper purpose”.

Any person who wants to inspect a company’s register of members or PSCs must state in the request their name and address, whether the information will be disclosed to any other person and, crucially, the purpose for which the information is to be used.

A minimum of 2 days’ notice is required if the requested inspection date coincides with the notice period of a general meeting of the shareholders, or a written members’ resolution. In all other cases, the required notice period is 10 working days.

What If I do not adhere to the record keeping requirements?

Failure to adhere to the record-keeping requirements constitutes an offence by both the company and the company officers. The level of fine or punishment differs depending on the requirement being broken:

Requests made for a “proper purpose” must be met within five working days or else risk the penalty of a fine under Section 118 of The Companies Act 2006. The company will receive a fine not exceeding level 3 (maximum £1000), and for continued contravention, a daily default fine not exceeding one-tenth of level 3.

Failure to keep records required to be held in their original form may constitute a fine of up to £3000 by HMRC.

Under the statutory regulations in Part 21A of The Companies Act, failure to comply with information duties can result in imprisonment for a term not exceeding two years or a fine (or both).

If you have any queries relating to your company’s record-keeping compliance please contact us online or give us a call on 028 9055 9955. If required, we can provide you with the required company registers to keep you on track.

BREXIT UPDATE: Government Announce £20 Million SME Brexit Support Fund

Government makes grants of up to £2,000 available to help small businesses cope with post-Brexit paperwork and costs when trading with the EU

Small businesses that only trade with the EU can apply for a £2,000 grant through the Brexit Support Fund. The fund will open up for applications in March.

The government has made available £20 million for the Brexit Support Fund . The fund aims to help small businesses cope with new customs, rules of origin, and VAT rules import that come into force from April and July.

The new import controls will come into effect in three stages up to July 1 2021. Further details may be found in the Border Operating Model.

Businesses do not have to complete new import declarations for up to six months, unless they are moving controlled goods.

What is a Guarantee Company?

When setting up a new company it can be overwhelming to determine which type of company best suits your needs. In addition to companies limited by shares (LTD) and limited liability partnerships (LLP), it may also be limited by guarantee. The following guide outlines all the key features of a guarantee company.

Defining a Guarantee Company

A company limited by guarantee, also known as a ‘not for profit’ or ‘charitable company’, is one in which shareholders do not remove the profit from the company. Instead, all profit made by the company is re-used for the good of the business.

A company limited by guarantee is mainly used by charities, social enterprises, and non-profit organisations.

A company without shares

Whilst guarantee companies do not have any shares or shareholders, it is under the ownership of guarantors who pay an agreed amount towards company debts.

This guarantee lawfully binds the owners in place of shares. Alternatively, company earnings are retained by the company to realise their charitable or non-profit objectives.

Profits

Normally, a guarantee company does not distribute profits to guarantors. These are instead re-invested to aid the company in achieving its objectives. Any distribution of profits within the company will force the forfeit of its ‘charitable status’.

Much like shareholders in a company limited by shares, the guarantors are protected by limited liability. In the event of bankruptcy, their financial liability is limited to what they have agreed to pay. Guarantors have no legal accountability for the debts beyond their limited liability.

Ownership and Control

A guarantee company is controlled by the director and at least one director must be appointed to run the regular business operations and financial investments. This director may also be a guarantor in the company.

The company is owned by the guarantors and only one guarantor is required. This guarantor may be a person or a corporate entity. Each guarantor signs a guarantee statement at the formation of the company, agreeing to a specific amount payable as a guarantee should the company fail. This guarantee is usually £1 per member.

Guarantee company vs LLP

Whether you set up a guarantee company or LLP will depend on your company’s objectives.

A guarantee company is suited to anyone seeking to operate a social enterprise or non-profit organisation whilst safeguarding their own liability.

An LLP is an incorporated structure more suited to groups seeking to operate a commercial partnership in order to reduce their individual financial liability. LLPs are most often set up by accountants and solicitors.

The benefits of a guarantee company

A company limited by guarantee possesses many benefits. Firstly, it is a separate legal entity from its owners, and therefore is responsible for its own debts.

Secondly, the guarantors have protection over their own personal finances and are responsible only for paying company debts up to the amount guaranteed.

Finally, the formation of a Limited company is beneficial to boost company branding. This makes the company appear more credible and builds trust among clients and investors.

Find out more

For more information on guarantee companies or help on setting up your own company, contact us at our website or give us a call on 028 9055 9955.

UK Trade Marks and Designs after 1 January 2021

In just 44 days there will be changes to how the intellectual Property (IP) system and the Intellectual Property Office (IPO) will operate. The following covers the upcoming changes to trade marks and designs, unregistered designs, and parallel trade from the UK to the EEA as a result of the Withdrawal Agreement.

Trade Marks and Designs

At the end of the transition period, registered Community designs (RCDs) and unregistered Community designs (UCDs) will no longer be valid in the UK.

These rights will be immediately and automatically replaced by UK rights. If you own an existing right, you do not need to do anything at this stage.

From 1 January 2021, any existing RCDs, UCDs, EU, and International trade marks will only cover the remaining EU States.

Registered Designs

Upcoming legislative changes will ensure the holder of an RCD is provided with an equivalent UK right. They will retain the registration and application dates recorded against the corresponding RCDs and will inherit any priority dates. Re-registered designs will be created at no cost to the RCD holder.

As independent UK rights, they may be challenged, assigned, licensed or renewed separately from the original RCD.

If you hold a pending RCD application on 1 January 2021, it will be possible to apply to register a UK design up to, and including, 30 September 2021. So long as the UK application relates to the same design filed in the pending RCD application, the UK design will retain the earlier filing date of the pending RCD.

Once created, a separate renewal fee will apply both for that UK right and the corresponding RCD. These will be paid separately to the ICO and EUIPO.

Unregistered Designs

Designs protected in the UK as a UCD before 1 January 2021 will be protected as a UK continuing unregistered design and will be automatically established on 1 January 2021. It will continue to be protected in the UK for the remainder of the 3-year term.

Under the new law, a UK unregistered design right will be created called a supplementary unregistered design (SUD). The terms of SUD protection will be similar to that already provided by UCD. Both SUD and UCD provide protection for both 2D and 3D designs for a period of 3 years. However, this protection will not extend to the EU.

SUD will be established by first disclosure in the UK. It is important to note that first disclosure in the EU will not establish a SUD whilst first disclosure in the UK will not establish a UCD. It is vital to carefully consider the manner of first disclosure as the novelty of the design could be destroyed if done incorrectly. Both the IPO and EUIPO can provide further guidance on first disclosure.  

Parallel Trade from the UK to the EEA

Parallel trade is the import and export of genuine IP protected goods. This occurs when the IP rights in these goods are ‘exhausted’. This means they have been placed on the market of a specific territory by, or with the permission of, the rights holder. There will be some changes to the exhaustion of IP rights systems post-Brexit.

Goods placed on the UK market after the transition period may no longer be considered exhausted in the EEA. This means that a business exporting these goods from the UK to the EEA may need the right holders consent.

In the event that your business is exporting IP-protected goods to the EEA which have already been placed on the UK market, you may need to contact the rights holder to get permission to continue this practice after the transition period ends.

Copyright

Most UK copyright works will still be protected in both the EU and the UK. This is because of the UK’s continued participation in the international treaties on copyright. For the same reason, EU copyrights will continue to be protected in the UK.

If you do not take action, there is a risk your business operations will be interrupted. You can find out what other actions you may need to take by using the checker tool.

Registering your new UK company for tax

Following the formation of your new UK company you must register for tax. This includes registering the company for Corporation tax and yourself for self-assessment. Additionally, it may be necessary to register for PAYE and VAT. All tax enrolments can now be completed online via HMRC.

Within 14 days of the company formation HMRC will send a letter to your registered office address. This letter will contain information about the different taxes which need to be registered for and will include your company’s Unique Taxpayer Reference (UTR) number. This number will be needed whenever you file tax returns or contact HMRC about your company’s tax.

Setting up an online account with HMRC

To Set up an online account with HMRC you must create a Government Gateway user ID and password. The following information will need to be provided to register:

  • Your company’s UTR number
  • Tax Office Number (a 3-digit code located before the UTR number on your HMRC letter)
  • Company incorporation date
  • Company name and registration number
  • Company’s registered office address
  • Annual accounts date
  • Nature of business activities (SIC code)
  • Name and address of each director

Within 7 days of registration you will receive an Activation code by post. This code is only valid for a short time so it is important to activate your online account as soon as possible.

If required it is possible to register for VAT and PAYE whilst registering for Corporation Tax.

Corporation Tax

Registration for corporation tax must be completed within 3 months from the date your company starts any business activity. This includes but is not limited to:

  • buying and selling goods with a view to making a profit
  • renting or buying property for business purposes
  • providing services
  • employing people
  • advertising

Once a company is deemed active for Corporation Tax by the HMRC it is required to submit Company Tax Returns.

Value Added Tax (VAT)

Registration for VAT is required if your company’s VAT-taxable turnover exceeds £85,000 in a 12-month rolling period. VAT-taxable turnover is the total value of everything sold which is not exempt from VAT. The threshold may change if your company buys and sells goods from EU countries.

It is also possible to register for VAT if your company is below this threshold. Voluntary VAT registration can be beneficial for small businesses as VAT paid on goods and services can be reclaimed.

After registering for VAT you should receive a VAT certificate within 30 working days. Following this you must register your online VAT account by registering for VAT Online Services with HMRC.

All VAT paperwork and bills must be completed online. VAT returns are submitted to HMRC every 3 months, even if there is no VAT to pay or claim. The deadline for submitting VAT returns and paying bills is 1 calendar month and 7 days after the 3-month accounting period.

Pay As You Earn Tax (PAYE)

To pay employees’ wages as well as deduct Income Tax and National Insurance from employment, your company must be registered with HMRC as an employer.

The PAYE system is used by HMRC to collect employee Income Tax and National Insurance directly from the employee on payday. PAYE can be operated directly by yourself using specialist software or a payroll provider (usually an accountant) can do so on your behalf.

Registration as an employer is completed via your Government Gateway Account by filling out the requisite forms. Once processed, HMRC will post your employer reference number and tax office reference number to your registered office. You must register as an employer before the first payday.

Paying your PAYE

Each month you must pay HMRC the Income Tax, National Insurance, and any other deductions owed from employment minus reductions on any Employer Payment Summary (EPS) that you submitted to HMRC before the 19th in the current tax month.

An EPS is used to claim refunds and allowances from HMRC and must also be submitted if you do not pay any of your employees on a given month.

The PAYE bill must be paid by the 22nd (19th if by post) of the following tax month if payment is made on a monthly basis. Otherwise the deadline is the 22nd after the end of the quarter.

Pension Schemes

You must set up an employer’s workplace pension scheme and make contributions to staff over the age of 22 who work in the UK and earn at least £10,000 per year.

3% of each employee’s ‘qualifying earnings’ must be paid into your staff’s pension scheme.

Self Assessment

Self assessment is the system by which HMRC collects personal tax on dividends and other sources of income not taxed via PAYE.

Registration is completed by filling out a simple form online with HMRC. Once registered it is your responsibility to complete your own tax returns each year. HMRC will send a letter to remind you to prepare a Self Assessment Tax return.

Within a few days of registration you should receive a personal UTR number which will be used to create a new online account allowing you to sign-up for the Self Assessment service.

The deadline for Self Assessment for 20/21 tax year is 5th October 2021. Other deadlines differ depending on the method of return:

  • Paper – must be filed by midnight on 31st October after the end of the tax year
  • Online – must be filed by midnight on 31st January the following year

The final payment of Income Tax, Dividend Tax, and NI (class 2 and class 4) for the 20/21tax year must be paid by midnight on 31st January 2022.

Share Capital – A Guide for Private Limited Companies

What is share capital?

The share capital of a company refers to the total nominal value of all shares issued to a company. This nominal value represents the ‘limited liability’ of company members, denoting the sum shareholders must pay in the event that the company is wound up. This nominal value is not representative of the real value of the company.

Types of shares

Ordinary

Ordinary shares are commonly used for most simple structures. They are equally proportional with respect to voting powers, rights to dividends and rights to participation in the distribution of capital in the event of the company being wound up.

However, ordinary shares may not be suitable in all circumstances. Examples of alternative share classes and the rights attached are as follows:

Non-voting

A non-voting share class may be used to give shareholders the right to dividends and participation without giving them power over the decision-making within a company. This may be used to issue dividends to friends or family without giving them power to veto any proposed decisions.

Preference

Preference shares take priority when dividends are issued. An owner of a preference share would be paid a dividend before anyone holding an ordinary share. This may attract new investors who can recoup their investment before dividends are issued elsewhere.

Alphabet

A company may have “Ordinary A”, “Ordinary B” and “Ordinary C” shares. This could be used to differentiate between the rights each shareholder has. Another common reason for this is to issue dividends unevenly between shareholders.

Choosing and Changing Share Structure

All companies must issue at least one share to form a company limited by shares. For small companies with a single shareholder for example, are often incorporated with only a single share.

Choosing an optimal structure from the outset when forming a new company can prevent disputes between owners. Nevertheless, circumstances can change and the need to amend the share structure of a company may arise. Fortunately it is possible to change the share structure of a company as and when needed. New shares may be allotted, sold, and transferred to new shareholders via the passing of an ordinary resolution. This is passed by simple majority at a general meeting of shareholders, board meeting of directors, or by written resolution. Within one month of a resolution being passed, an SH01 must be filed at Companies House confirming the change in shareholding. A number of different factors will determine the most appropriate share capital for a particular company:

Large Share Capital

Beyond obtaining a trading certificate needed to take a company public, which requires a minimum £50,000 authorised share capital, a larger share capital can be used to make a company appear more financially secure and increase financial flexibility. Lenders and creditors may use share capital as a factor in determining the creditworthiness of a company whilst investors are more likely to back a business with higher share capital. Additionally, some companies opt for a large share capital as an alternative to taking out a loan as there are no interest payments or restrictions involved.

For companies who begin with a small share capital, it should be noted that an increase in share capital can result in the shares of existing shareholders being diluted.

For further assistance on the formation of a company or on the allocation of shares within your existing company, give us a call on 028 9055 9955 or contact us via our website.

A Guide to the Memorandum and Articles of Association

Opening a new company generates a range of wide range of paperwork. Two important documents that any new business owner should be aware of are the memorandum and articles of association. This guide will tell you how both of these documents apply to your business.

Introductory Guide to the memorandum and articles of association

Both documents are a legal requirement for all UK companies and are produced upon incorporation and registered to Companies House. They can be defined as follows:

The memorandum of association is a legal statement outlining the names of the company founder, listing each subscriber’s objective to become a member and incorporate the business via a signature.

The articles of association are the constitution of the company and act as a guide on how the company is to be run. Most companies will adopt a ‘model’ set of articles however, where required, a personalised set of articles with bespoke rules and regulations can be adopted.

The memorandum and articles of association are public documents that may be viewed and downloaded from the Companies House website. In addition every company must keep a copy of the memorandum and articles of association at their registered office address.

Can the memorandum be changed?

As the memorandum is a legal document its format cannot be altered before the formation of the company. Once incorporated the name of the original subscribers cannot be altered or removed as it is a document with historical significance and must remain consistent throughout the lifetime of the company.

What is covered in the articles of association?

The model articles of association outline the following in relation to how the company should be run:

– Decision making

– Member’s rights, duties, and liabilities

– Director’s duties, responsibilities, and powers

– Director appointment and removal

– Share capital

– Profit distribution

– Company secretary appointment

– Administrative issues

Can the articles of association be altered?

Unlike the memorandum, the articles of association can be changed at any time so long as the changes are agreed by a 75% majority of the company members in a general meeting and a special resolution is passed. Once this process is completed a copy of the updated articles must be submitted and filed with Companies House within 15 days.

Corporate Insolvency and Governance Bill receives royal assent

The Corporate Insolvency and Governance Bill received royal assent on 25th June and the measures of the Act are in place as of 27th June. The Act has been introduced to relieve the burden on businesses during the coronavirus outbreak.

The Act

Measures of the Act include:

– The introduction of temporary easements for Annual General Meetings
(AGMs) and filing requirements for public limited companies (PLCs)

– The introduction of new corporate restructuring tools to the insolvency
regime to give companies the time they need to maximise their chance of
survival

– The temporary suspension of parts of insolvency law to support directors
during the crisis

Secondary Legislation

Secondary legislation introduced as a result of the Act grants companies automatic extensions for:

– Confirmation statements

– Registration of charges

– Event-driven filings, such as changes to company officers

– Filing of accounts for most companies

It should be noted that if you have already extended your accounts filing deadline, you may not be eligible for an extension. The extensions are a temporary measure and the deadline will not be extended next year if it falls on or after 6th April 2021.

Setting up a limited company – The Benefits

Company Formation

Setting up a limited company

Setting up a limited company has plenty of advantages that may be more worthwhile than going alone as a sole trader.

Here are a few reasons why you should set up a limited company.

A company name

One of the great aspects of setting up a limited company is that you can have your very own company name. Once registered the name is protected by law and no-one else can use it. Your name can become highly recognisable, making your business appear more professional to others who may collaberate with you; especially larger companies who may only do business with trade names. Don’t cut yourself short from opportunities; if you are looking for big collaborations and recognitions, change from a sole trader to a limited company.

For tips on choosing a company name check out Forbes’s Nine Factors for finding the right name for your business.

Financial security

You will be much more secure with your finances. You are fully protected if anything should go wrong and the implications will not be put on your shoulders. If you were self-employed, you would not have any real financial security. It is not the individual who would take the blow; but the limited company, which gives you a bit of breathing space from the business itself. In the highly unfortunate case of the business collapsing, your own finances and properties would not be affected, which gives you a bit more stability within your personal life.

Tax

You will pay far less tax than if you were a sole trader which is a great benefit. The tax rate that you would be paying is approximately 20% at the current time, and will drop even further by 2020 to around 17% compared to 40% for sole traders. A limited company may pay through loans, dividends and PAYE; saving you huge amounts of money when it comes to paying tax. Therefore, you are able to keep more money that you have earned through the business.

Funding 

Finding funding can be difficult for all types of businesses. However, securing business finance is easier for limited company than it is for sole traders as the former is a distinct legal entity.

Shareholders and Succession

A limited company is able to issue various classes of shares bestowing different rights on each shareholder including the rights to vote and collect dividends. Owning a limited company allows for the easy transfer of shares and selling of stakes in the company.

As a result, when a shareholder wishes to retire or passes away, it is far easier to transfer ownership and maintain a succession structure.  

If you would like any further information on limited companies or company formations, please visit our website or give us a call today on 028 9055 9955.