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UK Company Compliance and Maintenance Guide

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UK Company Compliance and Maintenance Guide

Unless otherwise indicated, the UK company stated in this guideline refers to a private company limited by shares formed and incorporated in United Kingdom in accordance with Companies Act 2006.

After a company is officially registered in UK, it is required by the UK Companies Act and Customs and Inland Revenue Tax Act to hold an annual general meeting and filing a Statement of Confirmation every year, updating books of accounts, auditing of financial statements (unless exempted) and filing of tax returns.

This guideline provides a summary of the various maintenance and compliance requirements imposed by the UK laws and regulations on a private company limited by shares registered in accordance with the UK Companies Act 2006 and estimated costs likely to be incurred to comply with these requirements. This guideline is divided into six sections, sections one to five detail the compliance and maintenance requirements and section six lists the estimated related costs to maintain a UK company in good standing.

This guideline is not meant to cover all the compliance requirements imposed on a company by the UK laws. If any issue of interest is not covered in this guideline, you are welcome to contact and consult our professional accountants.  

This guideline note also does not cover the area of licenses and permits. If your UK company involved in the regulated business that requires certain license or permit from the UK Government, you will need to obtain that license or permit before it can commence its business. You are welcome to contact our professional consultants for the detailed information of the above licenses and permits in UK.

  1. Companies Law Related Compliance Requirements

    (1)
    Company Secretary

    You do not need a company secretary for a private limited company. Some companies use them to take on some of the director’s responsibilities.

    The company secretary can be a director but cannot be:
    (a) the company’s auditor
    (b) an ‘undischarged bankrupt’ - unless they have permission from the court

    The restrictions placed on a person when they’re made bankrupt usually end when they’re free from their debts (known as ‘discharged’). You can check if someone has been discharged using the Insolvency Register.

    (2)
    Registered Office

    All UK limited companies are required to provide a registered office address. The registered office must be able to receive letters and documents relating to the company. Companies House do not allow the use of a PO Box address for the registered office of a company. The address must also be in the country of incorporation. Therefore a company registered in England and Wales must provide an address in England or Wales. Likewise, companies registered in Scotland must have a Scottish address.

    UK companies are legally required to display the registered address on all stationery and correspondence with clients. This includes invoices and letters. The company name must be displayed outside address or at the entrance to the building if it is a large building with many offices. Since the introduction of the Companies Act 2006, it is also a legal requirement to display your registered office address on your company’s website.

    (3)
    Local Director

    A UK company is required to appoint at least one individual over the age of 16 as its director. Directors are legally responsible for running the company and making sure company accounts and reports are properly prepared.

    A director of a UK company can be a non UK resident and live anywhere in the world and there is no requirement for them to live in the UK during or after their appointment as company director.

    Directors’ names and personal information are publicly available from Companies House. As directors must provide a service address (or ‘correspondence’ address), which will also be publicly available. If you use your home address, you can request Companies House to remove it from the register.

    (4)
    Event Driven Reporting Requirements

    Under the Companies Act 2006, the company must inform Companies House of corporate changes including:

    (a) Notification of a change in the company’s officers or in their personal details;
    (b) Changes to the company’s registered office;
    (c) Allotment of shares;
    (d) Changing the accounting period end;
    (e) Registration of a charge (this can be registered by any party with an ‘interest’ in the charge and not just the company);
    (f) Change of company name;
    (g) Change of constitution; and

    In addition to the above, companies must also maintain a minute book and registers of the company either at its registered office address or another nominated address.

    (5)
    Statement of Confirmation

    Every UK private company must file a Statement of Confirmation (previously known as Annual Return) with the Companies House every year. The purpose of the Confirmation of Statement is to report:

    (a) Registered office address;
    (b) Principal business activity;
    (c) Address of where the company’s list of shareholders is kept;
    (d) Type of limited company, e.g. limited by shares or limited by guarantee;
    (e) Name and address of all company directors;
    (f) Name and address of the company secretary (if applicable);
    (g) The number and value of shares issued by the company, including the ownership of same; and
    (h) Where details of ‘debentures’ are kept (if applicable).

    Whilst there are no late filing penalties associated with annual returns should the deadline be missed, Companies House however can commence strike off and/or prosecution proceedings against the company and its directors if the annual return is not filed properly.

  2. Taxes Compliance Requirements

    (1)
    Corporate Income Tax Filings

    Companies must prepare and file a Corporation Tax (CT) return to report the company’s corporation tax to HM Revenue and Customs (HMRC).

    The corporation tax return must be completed even if the company does not have any tax to pay, unless HMRC advises otherwise due to the company being dormant for corporation tax purposes.

    Details on the CT return must include, but are not limited to, the following:
    (a) Capital allowances to be claimed for business assets purchased;
    (b) Gains on assets that have been sold in excess of the purchase price;
    (c) Directors’ loans not repaid at the end of the company’s financial year;
    (d) Repaid directors’ loans for the purposes of reclaiming tax;
    (e) Reliefs to be claimed; and
    (f) Any losses carried forward from the previous accounting period.

    The deadline for paying corporation tax is 9 months and 1 day after the company’s chargeable accounting period end and the deadline for filing a corporation tax return is 12 months after the company’s accounting period / year end. Companies defined as ‘large’ are required to pay their UK corporation tax liabilities in quarterly instalments, with the first instalment normally being due 6 months and 13 days after the commencement of the accounting period. The penalties for the late filing of a CT return are as follows:

    Time after the Deadline

    Penalty

    Remark

    One day

    £100


    Three Months

    Additional £100


    Six Months

    10% penalty added to the unpaid tax estimated by HMRC


    Twelve Months

    Additional 10% penalty added to the unpaid tax estimated by HMRC



    If the return is filed late three times in a row, the £100 penalties are increased to £500 each.

    (2)
    Value-added Tax (VAT)

    (a) VAT Registration

    VAT is an amount charged on most goods and services that are purchased in the UK and equivalent in Europe. It is very similar to GST (Goods and Sales Tax), but not the same.

    The UK threshold is set at £85,000. However, it is based on a 12-month rolling period so not just for the fiscal year 6th April to 5th April (the UK tax year). If it is likely that your sales of goods/services that would be applicable to UK VAT exceed £85,000 in a 12-month period looking back and forward, then you must register for UK VAT.

    A business can register voluntarily for VAT.

    (b) VAT Filing and Payment

    By default, all businesses are required to file their Vat return and make payment of VAT quarterly. However, business may request and if approved, file their Vat return on a monthly or yearly basis.

    VAT return and payment deadline is one calendar month and seven days after the end of the VAT period. For example, for the quarter ending 31 June 2020, your return must be submitted and payment cleared in HMRC’s account by 7 August 2020. It shall be noted that the payment of VAT should be cleared by the reporting deadline.

    (3)
    PAYE

    PAYE (Pay As You Earn) is a tax collection system. It ensures that the Government gets tax revenue from employed workers as soon as they start earning. You, as the employer, are responsible for running it. You may choose to engage an accountant, like Kaizen to do this work for you.

    Under PAYE, you are responsible for deducting income tax and National Insurance Contributions from your employees’ wages and paying this to HMRC every month. You also have to pay additional National Insurance Contributions as an employer. These contributions are called Employer’s Class 1 National Insurance Contributions.

    You are also responsible for sending in returns to HMRC showing the income tax and National Insurance due and paid.

  3. Financial Statements and Audit

    (1)
    Financial Statements

    Your company’s annual accounts - called ‘statutory accounts’ - are prepared from the company’s financial records at the end of your company’s financial year.

    Statutory accounts must include:
    (a) a ‘balance sheet’, which shows the value of everything the company owns, owes and is owed on the last day of the financial year
    (b) a ‘profit and loss account’, which shows the company’s sales, running costs and the profit or loss it has made over the financial year
    (c) notes about the accounts
    (d) a director’s report (unless your UK company is classified as a ‘micro-entity’)

    You must always send copies of the statutory accounts to:
    (a) all shareholders
    (b) people who can go to the company’s general meetings
    (c) Companies House
    (d) HM Revenue and Customs (HMRC) as part of your Company Tax Return

    You have different deadlines for sending your accounts to Companies House and your tax return to HMRC, but you may be able send them at the same time.

    If your company is small, a micro entity or dormant, you might be able to prepare and deliver a simpler (‘abridged’) accounts.

    (2)
    Appointment of Auditor

    An auditor of a private company must be appointed for each financial year of the company, unless the directors resolve otherwise on the grounds that audited accounts are unlikely to be required.

    The directors appoint the first auditor of the company. He or she then holds office until the end of the first meeting of the shareholders at which the accounts are laid before the members. At that meeting the members can re-appoint the auditor, or appoint a different one, to hold office from that date until the end of the next shareholders' meeting at which accounts are laid.

    However, private companies can pass an 'elective resolution' not to lay accounts before the members in a general meeting. If this is done, then the auditor has to be re-appointed, or a new one appointed, at another meeting of the company's members that must be held within 28 days of the accounts being sent to the members.

    The auditor is responsible for making a report to the company's members on all accounts of the company. The auditors' scope of work as required by the Companies Act requires them to report whether, in the auditors' opinion the annual accounts give a true and fair view of the balance sheet and profit and loss account and that the accounts have been properly prepared in accordance with the relevant financial reporting framework including international accounting standards and the requirements of the Act.

    (3)
    Audit Exemption

    In accordance with the Companies Act, a stand-alone company, that is, a company which is not a member of any group, that qualify as a small company under Companies Act 2006 is usually exempt from audit.

    A company is small if for both this year and last year it was not ineligible, and it met two out of three of the following criteria:

    Requirement

    Threshold

    Turnover

    ≤ £10.2 million

    Balance Sheet Total (Total Assets)

    ≤ £5.1 million

    Number of Employees

    ≤ 50 employees


    This applies to first financial year or takes two years to change. i.e. in relation to a subsequent financial year, where on its balance sheet date a company meets or ceases to meet the qualifying conditions that affect its qualification as a small company only if it occurs in two consecutive financial years.

    If your UK company is a member of a group, you can take the audit exemption if you are a small member (apply the limits given above) of a small group. To qualify as a small group, the group must meet 2 out of the 3 requirements, applying either net or gross thresholds.

    Requirement

    Net Threshold

    Gross Threshold

    Turnover

    ≤ £10.2 million

    ≤ £12.2 million

    Balance Sheet Total (Total Assets)

    ≤ £5.1 million

    ≤ £6.1 million

    Number of Employees

    ≤ 50 employees

    ≤ 50 employees


    Net = as per the consolidated accounts
    Gross= adding together the individual accounts before deducting intragroup transactions/ balances.
    N.B. these thresholds are for the whole worldwide group of companies.

    This applies to first financial year or takes two years to change. i.e. in relation to a subsequent financial year of the parent company, where on the parent company’s balance sheet date the group meets or ceases to meet the qualifying conditions that affects the group’s qualification as a small group only if it occurs in two consecutive financial years.

    (4)
    Annual Accounts Filing Requirements

    The annual accounts for a UK Limited Company are normally due to be filed with Companies House by 9 months after the company’s financial year end. Late filing will be subject to penalties listed in the table below:

    Filing Date

    Penalty

    Up to one month late

    £150

    One to three months

    £375

    Three to six months

    £750

    Over six months

    £1,500


    Penalties are doubled where a company files its accounts late for a second year. Continued non-filing of the accounts can lead to prosecution of the directors and striking-off of the company, with forfeiture of the company’s assets.

  4. Workplace Pension Duties

    Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension scheme and contribute towards it. This is called 'automatic enrolment'. If you employ at least one person you are an employer and you have certain legal duties.

    If your UK company currently or will employ at least one person and have at least one person aged between 22 up to state pension age, and who earns more than £192 per week (£833 per month or £10,000 per year), then your UK company will be an employer with staff who must be put into a pension scheme. Your automatic enrolment duties start when you employ your first member of staff (duties start date).

  5. Busines Licenses

    A business license is a permit issued by the government or a professional body that instructs how specific business activities should be carried out.

    The licenses you need for your business depends entirely on where in the country it's based and the industry you operate in and the business activities you intend to carry out.

    The most obvious and common businesses needing licensing are to do with selling alcohol, tobacco and gambling. For example, a pub or club selling alcoholic drinks, and a betting shop or casino.

  6. UK Company Maintenance Costs

    As stated above, after a company is officially registered in UK, it is required to compliance with the reporting requirements imposed by the Companies Act and Customs and Inland Revenue Tax Act, such as holding annual general meeting, updating books of accounts, auditing of financial statements (unless exempted) and filing of tax returns. Our fees for some of these services are fixed and others are determined by the nature of business and volume of transactions. We list in the table below the fees for some of our services for your reference.

    Item

    Services

    Fee (£)


    Basic Annual Maintenance Fees

    1

    Company Secretary/Registered Agent

    Yearly


    2

    Registered Office Address

    Yearly


    3

    Preparation of Annual General Meeting and Filing of Statement of Confirmation (Annual Return)

    Yearly



    Subtotal:

    800


    Other Maintenance Services Fees

    4

    Preparation and Filing of Annual Accounts (Dormant)

    Yearly

    400

    5

    Accounting and bookkeeping

    Monthly

    100 up

    6

    Corporate income tax

    Yearly

    300 up

    7

    Value-added Tax Registration (Voluntarily)

    One off

    300

    8

    Value-added Tax Registration (Mandatory)

    One off

    300

    9

    Value-added Tax Reporting

    Quarterly

    200

    10

    Financial Statement Statutory Audit

    Yearly

    1,000 up

    11

    Preparation of unaudited financial statements

    Yearly

    600

    12

    Payroll

    Monthly

    50/head


See also:
UK Company Registration Procedures and Fees
UK Company Deregistration Procedures and Fees
The UK Trademark Registration Costs and Procedures (2019)

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:

Email: info@kaizencpa.com
Tel: +852 2341 1444
Mobile : +852 5616 4140, +86 152 1943 4614
WhatsApp/ Line/ WeChat: +852 5616 4140
Skype: kaizencpa

Download: UK Company Compliance and Maintenance Guide [PDF]

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