Many companies have been set up under the Right to Manage and manage Flat for Tenants.
Provided the following apply you probably won’t have to complete Corporation Tax Returns or pay Corporation Tax
- The only income received by the company are the service charges paid by the property owners.
- The income is expended on the day to day maintenance and management of the complex.
- Surplus income is transferred to deferred income for future maintenance expenses.
- No deposit interest is earned in the year.
The guidance on the HMRC website is as follows:
Tax for the limited company
You must send a Company Tax Return to HM Revenue & Customs (HMRC) no later than 12 months after the end of the company’s first financial year.
After you do this, HMRC may decide to treat your company as ‘dormant’ – this means that they wouldn’t expect your company to send Company Tax Returns for later years.
They may do this if your company does none of the following:
- allow directors who aren’t residents or leaseholders to be appointed in its articles of association
- does more than manage the property in the interests of shareholders
- make a profit
- need to pay more than £100 in Corporation Tax in a year
- get any income from land
- pay dividends or other payments from profits to shareholders
- own any assets it is likely to dispose of which would give rise to a chargeable gain
- make payments that need to be taxed
They will write to the company if they decide to treat it as dormant.
When the company must always send a Company Tax Return
Your company must send a Company Tax Return every year if:
HMRC doesn’t write to confirm they think the company is dormant
the company starts doing any of the things in the list above, even if HMRC has previously said the company is dormant
Click here to access the spreadsheet
What is a Limited Company?
A limited company is an organisation that you can set up to run your business – it’s responsible in its own right for everything it does and its finances are separate to your personal finances.
Any profit it makes is owned by the company, after it pays Corporation Tax. The company can then share its profits.
What is a Sole Trader?
If you start working for yourself, you’re classed as a self-employed sole trader – even if you’ve not yet told HM Revenue and Customs (HMRC).
As a sole trader, you run your own business as an individual. You can keep all your business’s profits after you’ve paid tax on them.
You can employ staff. ‘Sole trader’ means you’re responsible for the business, not that you have to work alone.
You’re personally responsible for any losses your business makes.
The key Advantages and Disadvantages of Companies are shown below.
How do you form a Limited Company?
You can form your company directly with Companies House for £15, it normally takes 24 hours
- the company’s name and registered address
- names and addresses of directors (and company secretary if you have one)
- details of shareholders and share capital
Personally, I find it easier to use a formation agent such as Company Wizard for £16.99
Often using an agent will mean the company is formed quickly, sometime within a couple of hours.
What are the next steps?
Once your company has been formed you need to:
- Open a bank account for the Company, this can often take a couple of weeks
- Register for Corporation Tax
- Register for other taxes (if they apply to your business) – VAT, PAYE, CIS
- Appoint an accountant (recommended but not compulsory) – Form 64-8
- Set up your accounting software
- Create shareholder agreements, contracts and other legal documents (if required)
An intermediary is any person who makes arrangements for an individual to work for a third party or be paid for work done for a third party. An employment intermediary is also commonly referred to as an agency.
From 6 April 2015, intermediaries must return details of all workers they place with clients where they don’t operate Pay As You Earn (PAYE) on the workers’ payments. The return will be a report (or reports) that must be sent to HM Revenue and Customs (HMRC) once every 3 months.
Agencies will be required to let HMRC know the following details:
- Contractor’s name, address, date of birth, etc.
- PAYE reference.
- National Insurance number.
- How the contractor was engaged during the period (i.e. was he working via a limited company).
- The duration of each assignment.
- Details of the contractor’s limited company (e.g. company registered number).
- How much was paid to the contractor.
The regulations will give HMRC information that will enable it to decrease false self-employment and abuse of offshore working. This will help HMRC to:
- support intermediaries that comply
- penalise intermediaries that don’t comply
- make sure the right tax and National Insurance is paid by people working through intermediaries
- reduce unfair commercial advantage
Here is link to the full reporting requirements – Legislation Link
This is the link to consultation – Consultation
It’s time to run your first RTI PAYE year end and you have your own limited company, how do you answer this question?
||‘Yes’ if you are a service company – ‘service company’ includes a limited company, a limited liability partnership or a partnership (but not a sole trader) – and have operated the Intermediaries legislation (Chapter 8, Part 2, Income Tax (Earnings and Pensions) Act 2003 (ITEPA), sometimes known as IR35). Otherwise indicate ‘No’.
The question is now a bit more specific, which is great, because you will only answer ‘Yes’ if you have operated IR35.
Well over 95% of limited companies in the UK are “private” – it is by far the most common form of limited company.
The main advantages of a being public limited company are:
- Better access to capital – i.e. raising share capital from existing and new investors
- Liquidity – shareholders are able to buy and sell their shares (if they are quoted on a stock exchange)
- Value of shares – the value of the firm is shown by the market capitalisation (based on the share price)
- The opportunity to more easily make acquisitions – e.g. by offering shares to the shareholders of the target firm
- To give a company a more prestigious profile
As always there are some disadvantages to being a PLC (as opposed to remaining as a private company). The main downsides are:
- Once listed on a stock exchange, the company is likely to have a much larger number of external shareholders, to whom company directors will be accountable
- Financial markets will govern the value of the company through the trading of the company’s shares, and will represent the market’s view of the company’s performance over time
- Greater public scrutiny of the company’s financial performance and actions
These are the main differences in summary:
- You must use the description ‘PLC’
- A public company must have issued share capital to a nominal value of £50,000 of which 25% must be paid up.
- Only public companies can offer their shares to the public
- There are strict rules that shares must be issued for full value
- PLCs must file their accounts within 6 months from their year ends
- PLCs must have two directors
- PLCs must have a suitably qualified company secretary
- PLCs must hold AGMs when the accounts can be received
- PLCs cannot approve written resolutions unless authorised by the articles
- There are strict regulations on PLCs purchasing or providing financial assistance to purchase their own shares
- Traded PLCs cannot place restrictions on transfers of its shares. Otherwise such restrictions in the articles are permitted
- Election of directors at general meetings must be in separate resolutions
- PLCs cannot take advantage of the abbreviated accounts regime (but nor can larger Ltd Co’s)
- Listed PLCs can hold shares in treasury (with limits)
- Listed PLCs must have their remuneration report approved at the AGM
- PLC directors can only have authority to issue shares for five years
- A PLC articles cannot exclude pre-emption rights on the issue of new shares
- PLC financial results must use International Accounting Standards if listed but unlisted Plc’s can use UK GAAP
- Nominees of PLC shareholders where the PLC is listed on a regulated market can nominate information rights for the shareholders
- The articles of PLCs must have a specific authority to enable the board to authorise a transaction where the director has a conflict of interest