Business in the UK – A Route Map

What Company Laws and Regulations should you be aware of?

It is relatively easy and cheap to form a company in the UK. You will need at least one director, a UK registered office, a name for the company and at least one shareholder. You will also need to register the details of any people with over 25% control, referred to as people with significant influence. Normally forming a company takes a few days. Other legal structures exist and advice should be sought to ensure the right structure is created.

Forming a Limited Company

Directors and Company Secretaries

What is Companies House?

Year End

What company laws and regulations should you be aware of?

In general anyone over the age of 16 can be a director, and they do not need to live in the UK. Directors must not have been previously disqualified. Company secretaries are no longer required and the activities can be outsourced to a firm like BDO.

All companies must file key documents including changes in directors and shareholders, original formation documentation (articles and memorandum), an annual confirmation statement and the company statutory accounts. All this information is on public record and freely available online including the company's accounts. Companies House will communicate with the company if there are breaches.

Your company year-end will default to the end of the month when the company was formed. You can change the year-end at any time up to the filing date for the financial statements, including after the year end. You can shorten or lengthen the financial year to adjust the year end but there are restrictions on how frequently you can lengthen the year.

What key tax issues should you be aware of?

Corporation Taxes

Corporation tax is paid on the profits of the company currently at a rate of 25%. The taxable profits are fundamentally derived from the accounting profit, adjusting for depreciation (replaced by writing down allowances for tax) and disallowable expenses such as entertaining. There are many reliefs available to incentivise certain activity such as research and development and investment in plant and equipment.

Payroll Taxes

Companies must pay tax on employing staff and also collect employee taxes through the payroll (see later). The main tax employers pay is Employer’s National Insurance Contributions charged above certain thresholds at 13.8%. For large companies with an annual payroll in excess of £3million, there is also an apprenticeship levy of 0.5%. However, the counter of this is there are apprenticeships potentially available to help employers training staff in the UK.

Sales Taxes

Any company with sales in excess of £90,000 will need to register for VAT although all trading companies can opt to register. VAT for registered companies is charged at 20% of the sales value for relevant sales, but can be recovered on supplies incurring VAT. Sales outside the UK tend to be zero rated but you may need to register in the countries in which you sell and charge local sales tax. VAT returns are normally completed quarterly.

Other Taxes

Other taxes include: Tax on staff benefits (for which an annual P11D form must be completed for each worker) Duty is charged on importing goods from outside the UK. The actual rate depends on the description of the goods and their origin. Stamp Duty is charged on the sale of land and shares. Business rates are local council taxes charged on business premises to cover local public services.

What do you need to be aware of when employing staff?

Payroll Taxes

When employing staff in the UK there are many laws and regulations (for example, companies can be sanctioned for not paying them at least the UK National Minimum Wage rate). In terms of the operation of the payroll itself, this must be registered with HMRC and then information must be filed each month to show the amounts paid and deducted (Real Time Information.) For this reason, many new businesses choose to outsource their payroll. Employees should have tax deducted from their gross pay, and so they receive net pay and the employer must pay the PAYE and NIC direct to HMRC within a set time.

Pensions

Employers are required to provide a workplace pension for all qualifying employees. This requires staff to be ‘auto-enrolled’ into the pension scheme from the start and only they can chose to opt out. The employer will make contributions of 3% and the employee will contribute 5%. Employers are not allowed to incentivise staff not to join.

What key accounting and audit regulations do you need to be aware of?

Financial Statements

All companies must file their financial statements at companies house within 9 months of the year end. Companies can file the accounts in accordance with UK GAAP, or following IFRS or another GAAP convention. The most conventional framework is UK GAAP, specifically FRS 102 (which has options to apply reduced disclosure for small companies.) Financial statements are filed and on public record at Companies House, and fines apply for late filing. Companies will be struck off if there is repeated failure to comply with the regulations.

Audits

All companies other than Small companies require an audit, and many others opt for an audit to provide assurance over operations in the UK. Also, small companies which are part of a non-small group must be audited. A small company is one where two of the following are met: 50 or less staff; turnover no more than £10.2m or gross assets no more than £5.1m.