Our last blog looked at sole traders becoming limited companies and whether it was a good idea.
If you want to become a limited company after reading our advice, then one thing we mention is your paperwork increases.
So what do you need to file to stay legal? If you fail to look after these forms and taxes you could end up with surcharges.
Of course, we help our clients with these issues but it’s always a good idea to make sure you fully understand what is required of you. It helps you as well as us if you know what to look out for.
Company Accounts and Confirmation Statement
As a sole trader, you will have kept accounts to help you file your self-assessment tax form. Well, you need to do something similar as a limited company!
But rather than just being used for your self-assessment payment, your details need to be put on file with two government bodies.
Once a year you must file Company Statutory Accounts with Companies House. You must also submit them to HMRC.
These have to filed nine months after your ‘year-end’. HMRC receives full accounts while Companies House receives abbreviated accounts. They do not contain detailed reports such as your profit and loss account to help protect the performance of your business.
You must file a Confirmation Statement to Companies House too, which is a ‘snapshot’ of your business. This contains details such as shareholdings, your registered business address and who the directors are.
Limited companies and Corporation Tax Return
Limited companies must pay and file a return for Corporation Tax, which is basically tax paid on your company’s profits. You need to file (or your accountant will) a CT600 form with HMRC.
Before you file it, however, you need to do a ‘tax calculation’. This is calculated taking into account any allowances and reliefs to give you one figure. You then add this to your statutory accounts along with the CT600 form and file it all to HMRC.
Your CT600 has to be filed 12 months after your company’s financial year-end. But your payment has to be made sooner — in fact, 9 months and 1 day after the financial year-end.
We help our clients work out their dates as well as their allowances and reliefs to come up with the final taxable figure.
Payroll and PAYE
Pay As You Earn reports must be made monthly to HMRC. This is how your employees pay their income tax, but it’s a job for limited companies to carry out on behalf of the taxman.
When running payroll, your company takes each employee’s salary before tax and deducts:
- Income tax
- Their National Insurance
- Other deductions, such as pension contributions
All deducted amounts must be paid to HMRC and other relevant parties, such as student loan repayments. A full list of HMRC deductions are available on its website.
You have to then file a report of these figures to HMRC every time you ‘run payroll’ and pay employees.
You might also need to file pension automatic enrolment. This is usually for larger companies and having an accountant is beneficial the larger your company becomes.
Directors’ tax filing
Company directors must also file a self-assessment tax return for their earnings between 6 April to 5 April the following year. As with sole traders, these must be declared by 31 January to HMRC.
VAT filing for limited companies
If you have also voluntarily registered for VAT (check out our blog about that here) you need to submit a return every quarter.
Two things you must do are:
- File the return
- Pay the VAT
The return must be submitted 1 month and 7 days after the end of each quarter.
Becoming limited has its advantages but the extra paperwork may seem overwhelming. If you fear that the extra work will impact on your earning potential, speak to us or your accountant.
While bookkeeping software such as QuickBooks or Xero are helpful for keeping track of receipts, they don’t offer you the advice an experienced can give you.
Making a genuine mistake can often cost you in the long run, so it’s best for an expert to check your paperwork before you file.