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These duties are laid out under the Companies House Act of 2006 and if you fail to comply with legal and regulatory ones, such as submitting company accounts, then you can be prosecuted as it is a criminal offence not to comply with these rules. Director’s address Another aspect of becoming a director is that you must give an official address as part of the company formation paperwork.

This address is then logged on a public register where anyone can see it, alongside your business address. Some directors prefer for their home address not to be a matter of public record, so for this reason they choose to use a director’s service address such as the one offered by Your Virtual Office. This allows you to use our prestigious central London address as the director’s address rather than your own personal home address and prevents people from finding out where you live.

Using our London address can also add gravitas to your business, especially for new companies looking to establish a credible reputation in the business world. It can look very professional on your company stationary. The directors service address package includes forwarding of all your important statutory mail for the duration of your contract. Being a share holder the other main role required to establish a limited company is that of the shareholder and each company needs to have at least one shareholder when formed. Shareholder can also be known as members depending on the format of the company selected.

A shareholder can be a person, a group of people, a partnership, another company or even another kind of organisation or corporate body. A shareholder can also become the director of the company – you don't have to be one or the other, you can hold both roles. On the whole, shareholders don’t usually get involved in the day to day running of the company or become involved with their financial affairs, but shareholders do carry some responsibilities. These include:

• Investing financially in the business (at least £1 to be a shareholder)

• Receive a portion of profits relating to their shares

• Contributing to any company debt in proportion to their shares

• Address of the principle place of business if different from the registered address provided to Companies House

• Helping choose a director and deciding on director’s powers as well as their salary

• Authorising the transfer of shares

• Names of all the shareholders in a company are part of the public record along with a contact address, though the shareholder can appoint a nominee if they wish to keep their personal details off the public record.

• Shareholder agreement

Shareholders normally agree to a shareholder agreement which isn’t a legal requirement but is legally binding once signed. It defines the responsibilities and rights of the shareholders, alongside how the company is managed and decisions made. It can cover issues such as the appointment and removal of secretaries and directors, their salaries, restrictions and procedures relating to issuing and transferring shades and even changing the structure or nature of the business.

The document is private and not entered into the public record. It can be created with a solicitor at the time of the company forming or at a later date. A copy should be retained on the business premises and by all shareholders if required.

IN01 - Register a private or public company

You ca use the IN01 form to incorporate, or register, a private or public company. The link includes the optional continuation pages if you need these too. You can complete the paper form to register or incorporate a company within the UK. The paper registration and filing costs £40.00 to complete. To complete the paper version, the forms need to be printed on white paper at full A4 size. Alternatively you can register your company online for a fee of £12 through WebFiling if it is a private company limited by shares with model articles.

Form to Give Notice of Subscribers with Share Capital

This is for a company with share capital. You can use this pro-forma for a memorandum of association to form a company with share capital. It is used to notify Companies House that each subscriber to the memorandum of association:

• Wishes to form a company under the Companies Act 2006

• Agrees to become a member of the company

• Agrees to take at least one share in the company

Form to Give notice of Subscribers without Share Capital

This is for a company not having share capital. You can use this pro-forma for a memorandum of association to form a company without share capital. It is used to notify Companies House that each subscriber to the memorandum of association wishes to form a company under the Companies Act 2006, and agrees to become a member of the company.

AP01 – Appointment of director

Form AP01 is used to appoint an individual as director of a company, but not to appoint a corporate director, in which case form AP02 is used. Details of the company and of the individual is required including their service address. The service address does not have to be the person’s residential home address but can be the company’s registered address or an address used under a Director’s Service address, though this needs to be stated.

You can use our Director's Address Service if you would prefer to keep your home address private. Their residential address is included in the records but this information is not included on the public register, so will not be accessible by the general public. The form can be posted to Companies House or completed online.

AP03 – Appointment of secretary

Form AP03 is used to appoint a secretary but not to appoint a corporate secretary, for which form AP04 is required. The form includes the company’s details as well as the individual’s information and the date of their appointment. Both parties need to sign the form and it can be submitted by post or completed online.

AD01 – change of registered office

If the registered office of a business that is already formed is changed for any reason, then the form AD01 is used to notify Companies House of this change. It cannot be used to change the registered office of a Limited Liability Partnership, so form LL AD01 should be used in this situation. Company details and the new address is required for the form and it can be posted to Companies House or completed online.

AA02 – Dormant company accounts

If you are forming a company to be dormant and therefore not making a profit or trading immediately, then you should complete form AA02. The form is for use by a company that is limited by shares and has never traded with the exception of the issuing of those shares. The form cannot be used by charities or those companies limited by guarantee or any who have no shares.

363a – Annual Return

The Annual Return form 363a is completed each year on behalf of the company. It includes information such as the registered office and principal business activities using the SIC codes acquired when forming the company. Other information required includes the type of company, details of the company secretary and directors as well as past and present shareholders.

Abbreviated accounts

You must submit details about your company finances which must be made public in accordance with the Companies Act 2006. You must file a set of abbreviated accounts to Companies House every year, including information on cash held in the company, assets, debtors and creditors. Your first set of abbreviated accounts are due nine months after your first company year end. You can find out how to upload your abbreviated accounts to Companies House via Webfiling through this demo.

DS01 – Striking off application by a company

If you need to strike off a company then form DS01 is used for this purpose but cannot be used for a Limited Liability Partnership, where form LL DS01 is used in its place. Company details are required along with the signatures of all directors. It can be posted to Companies House or completed online. Here is a list of postal forms that a limited company can file with Companies House.

Here you will find all the necessary forms you need to register your limited company and also make changes to your limited company further down the line. For example, you may want to change your company name or change your registered office address should you move business premises, or update your PSC register. You will also find comprehensive forms for your company accounts, change of company's objectives, changes to your company officers etc. all of which must be filed with Companies House.

The basic business partnership

The basic business partnership formation involves two or more people who want to create a company together. It is a simple business structure that connects the individuals but doesn’t give the company any legal identity in its own right in the way that a limited company does. Business partners in a basic partnership are classed as self-employed and are registered with HMRC as such. When the company is formed, it should be registered with HMRC.

A company name will need to be chosen and one of the partners will need to be the ‘nominated partner’; this is the person who is responsible for submitting tax returns and for keeping the business records. Basic partnerships don’t need to register with Companies House nor do they have the requirements in terms of administrative and accounting that limited companies have. If anyone leaves the partnership, dies, or the partnership goes bankrupt, then the partnership is dissolved as it has no legal status in its own right.

The major downside of a basic partnership is that the partners will be liable for debts run up in the company name and will have to pay these costs in the event that the partnership collapses. It is also recommended that a partnership agreement is put in place before the company is created, dealing with how the company will be run, how much each partner has invested, how they will work together and what happens if someone leaves the company. Any issues that may arise are covered under the Partnership Act 1890.

Partnership income and tax

When you register as a basic partnership, income from the business is reported alongside the individual’s income from other ventures. This means each partner needs to submit an annual self-assessment form to HMRC and keep accurate records of all business transactions and income. The partnership itself will also need to submit an annual self-assessment form along with one for each partner. Tax and national insurance will be due on any profits from the partnership.

Limited liability partnerships

A limited liability partnership, or LLP as it is otherwise known, is a type of partnership where some or all of the partners have a limited liability. This means that individual members can have lower liabilities for any debts accrued by the business. Forming an LLP does require more work and legal paperwork than a basic partnership and this is why Your Virtual Office offer a fully comprehensive company formation service for limited liability partnerships. With an LLP, the business itself is classed as a single entity and the company is liable for any debts run up during its operation.

This means that the individual partners are protected and will not be personally held liable for paying back all the company debts as they would be within a standard partnership agreement. This type of partnership is highly recommended for profit making businesses. An LLP needs to have at least two members and their rights and responsibilities as partners are laid out in a document called a ‘Deed of Partnership’.

The ‘designated member’ is the person chosen to be responsible for maintaining all necessary and statutory communication with Companies House as well as preparing and submitting the company accounts and being the main point of contact for all official business regarding the company. The LLP company formation service we offer for this type of business includes every step of the formations process and begins with providing the name of the company to start the process. After registration, we then take the name of the members and draw up a Partnership Agreement to protect everyone involved.

We have blank agreements available to complete with relevant information. Administrative details such as name and address of members, details of the amount of capital each partner will bring to the business as well as their roles and responsibilities will all be included in the documents as well as the details of what would happen to the partnership if a member chooses to leaves the business, retires or passes away. Most of this process can be very easily carried out via our website where you can pay for the service and provide us with the necessary information required to officially form your partnership.

We can then provide you with the relevant paperwork to confirm the company’s formation for your own records. We are here to help you every step of the way and are more than happy to advise and offer our expert guidance should you be unsure of any aspect of forming your LLP. Please do not hesitate to contact us if you need our help.

Understanding VAT

VAT forms something of a circle once you register for it. Your business must charge VAT at the stated rate of 20% (or whatever it is at the time) on any goods and services that you sell to customers and to other businesses. Your business will also pay VAT on all goods and services you buy from another business. Finally, your business must submit a quarterly VAT return to HMRC.

The idea is that with the VAT you charge on your goods or services as well as the VAT you pay, the two balance each other out quite evenly. If there is any different between the two, this is either paid to HMRC by you or paid to you from HMRC. Businesses with an annual income of less than the currently stated threshold figure can still register for VAT but it may not be beneficial, depending on the nature of their business.

What is VAT charged on

VAT is charged on a wide range of goods and services though there are some seemingly quite odd rules about what is exempt. Generally, it is charged on things such as:

• Sales of goods and services

• Hiring goods to someone or loaning if a payment is involved

• Selling assets from the business

• Commission payments

• Staff sales such as canteen meals

• Any business goods used for personal purposes

• Bartering, part exchange, gifts, and any other type of ‘non-sales’

The standard rate of 20% is charged on these goods and services but there are two other rates used for certain things. A reduced rate is applied to things such as children’s car seats as well as domestic fuel or power payments. Mobility aids for older people are another example. The other rate for VAT is the zero rate and this means the item is due for VAT but that the government have set the payment amount to zero. It is still recorded in VAT returns. Examples include items such as books and newspapers, children’s clothes, goods exports to non-EU countries and goods supplied to a VAT registered EU business as long as they have a valid VAT number.

Showing VAT charges and payments

In order to complete your obligations regarding VAT, you must show the VAT payment made during any transaction in your business, even if the item is a Zero rate. VAT needs to be shown on the invoice while the transaction needs to show on the business’ VAT account. It is then recorded on the VAT return. If an item is returned, then a replacement invoice or a credit or debit note is then issued to counter the original VAT payment. This should show the reversed VAT information as well as the reason why it was issued.

Discounts and free gifts

There are different ways to deal with discounts and free gifts from a VAT perspective to ensure the payments are recorded correctly. For example:

• A discount = VAT should be charged on the discounted rate

• A free gift = VAT should be charged on the value of the gift

• Multi-buys = VAT should be charged on the combined price of the items, assuming they have the same VAT rate

• Vouchers = No VAT if they are given away free, if not then at the price charged

• Free samples = No VAT due if they are for marketing purposes and to test a product so a small quantity

Submitting a VAT return

The three months accounting period for VAT means that returns are submitted every quarter. The information that must be provided includes the total sales and purchases for the period, the amount of VAT the business owe, the amount it can reclaim (what it has paid out) and what refund you expect from HMRC. Even if there is nothing for you to pay or to claim back, a VAT return must be submitted. You should check your VAT Return and payment deadlines in your VAT online account and make sure your finance department or accountant are fully aware of these deadline dates.

Your VAT account will tell you when your VAT Returns are due, and the date which the payment must clear HM Revenue and Customs’ account. The deadline for submitting your return online as well as paying HMRC anything owed are usually the same - 1 calendar month and 7 days after the end of an accounting period. The only exception to the above rules is if, for example, you use the VAT Annual Accounting Scheme. If the VAT returns is not filed by the deadline or the full payment is not made, then HMRC can make a penalty charge, usually a percentage of the outstanding amount. This percentage figure increases based around the annual turnover of the business.

Business address and mail handling

One of the easiest ways to make use of our mail handling service is to use our professional Central London address as your business address. This means that all mail sent to your business arrives at our office for our experienced staff to handle on your behalf. Not only that but your business benefits from having a prestigious London address as its business address – and legally, the business address you use for your correspondence doesn’t need to be your actual place of business. This kind of service is invaluable if you don’t have a business premises and don’t want to register your home address on public records.

It prevents people knowing where you live and turning up at your door and also stops your home address being inundated with mail that you don’t have time to go through. A mail handling service such as ours is also useful for rapidly expanding businesses who may plan to move to larger premises on a regular basis to accommodate a larger stock inventory or expanding office space. There is little risk of important mail and parcels becoming lost in the post or arriving at a previous address. Even companies that already have business premises can use our address and mail services.

Unless you have a secretary or admin assistant permanently sited on your premises, you will not have anyone who can expertly deal with the mail on a daily basis. Your business premises may be a warehouse, production facility or storage depot where no-one is around often enough to check the mail and sort out what is urgent or important from what is not.

Businesses that operate in the UK but are based in another country can also use this service. They are required to have an address in the UK for statutory mail and also it helps when UK based clients can contact them through a UK address. It also helps potential new clients to build trust in your company when you have a London based address instead of an international one.

How our mail handling service works

The system of mail handling is simple and customers can choose from a number of different options about how their mail is handled, depending on their requirements. We use the latest mail sorting technology to ensure everyone receives their own mail and that it is dealt with in a timely manner. One option for mail handling that we offer is ideal if you too are based in London, or regularly visit the capital on business.

You can call in at our offices in person and collect your mail at regular intervals to suit your schedule, or if you are waiting for something specific and know when it will arrive. Mail forwarding means that once we receive your business mail, we can then securely bundle it together and forward this on to you at an address of your choosing.

We can send mail anywhere in the world and offer cheaper forwarding mail rates than Royal Mail to save you money. By far the quickest way to get your mail is to have it scanned and emailed to you. If you prefer to keep your paperwork to a minimum, or like the idea of getting your mail instantly via email because of tight deadlines, then this is a perfect service for you. We offer a same day service where we can scan the content of your letters into our secure system and then send the information to you via email.

Benefits of the system

So why would you choose to use the mail forwarding system rather than simply sort through your own mail or use some kind of P.O Box or deposit box system?

Using our service you get:

• Experienced staff using the latest in mail sorting technology

• The ability to have signed for post accepted

• The option to collect your mail from our London office

• A same day scan and email service with little time delay between receiving and reading post

• Post forwarded the same day if you choose this option

• A London address to use on all correspondence

• The ability to keep your own address off the public record

• No need to hire a secretary or admin assistant just to deal with post

The service takes only a few minutes to set up and there are three different packages available. You can take our services for three, six or twelve month intervals and the top package also entitles you to use of our meeting room for 2 hours. There are no hidden costs involved in the service and no set up fees – the price shown on the website is what you pay. Virtual office services are the best way to give your customers the service they require without the need for a costly business premises. And we can even meet your customers at our door for visiting clients to complete the professional image.

How much you pay

National insurance is split into two sections – the part an employee pays and the part that their employer pays. When you are self-employed, you have to pay both sections. Class 1 is the rate that is paid by an employed person earning more than £155 per week and is made up from the amount they pay and the amount their employer pays. A letter will designate how much this is. An example would be someone who is a category A.

They would pay nothing for the first £155 per week that they earn and would pay 12% of any payment between £155 and £827 per week. If they earn more than £827 a week (£3583 per month) they would pay a further 2% on this extra amount. For that same person, the employer would pay nothing for the first £156 per week then 13.8% for payments between £156 and £827 a week and the same amount again for payments over £827 per week.

Category letters

So how are we allocated a letter that defines what we should pay? The system is worked out on a number of details. For example:

• Category B – married women and widows who pay a reduced NI

• Category C – employees who are over the state pension age

• Category J – employees who don’t pay it because they are paying through another job

• Category H – Apprentices under 25

• Category M – Employees under 21

• Category Z – Employees under 21 who are paying through another job

Everyone else is a category A and would come under the above example as to what they would need to pay apart from those who are classed as Category X and are under the age of 16, so therefore do not need to pay national insurance.

National Insurance rates for the self-employed

If you are self-employed, you pay two types of national insurance, depending on your income. These are classed as Class 2 and Class 4 payments. You pay Class 2 payments on profits over £5965 each year and you pay Class 4 payments on profits over £8060 a year. The amount you pay for Class 2 is worked out as a flat rate of £2.80 per week. Class 4, however, is worked out based on your profits.

If you earn between £8060 and £43,000 you will pay 9% NI while if you earn over £43,000 you will pay a further 2% on your earnings. Both classes of NI are paid through the Self-Assessment system. There are a few jobs that aren’t required to pay NI but agree to pay on a voluntary basis. These include people who run businesses involving property or land, those who make investments for themselves or others without a commission or fee and those who work as examiners, moderators or set exam questions.

Also exempt are minister of religion who don’t receive a salary or stipend. There are calculators available online that will help you work out how much NI and tax you will be required to pay on your earnings. National insurance payments will be due at the same time as tax revenues for that period.

Being a director

Responsibilities of being a company director can be varied, depending on how involved in the daily running of the company you are. Sometimes it can be simply offering your experience and views to help make the business a success while you may be called on to make decisions for the benefit of the company, without view to your personal gain.

There are other requirements of being a director that range from issues relating to tax and HMRC through to taking a share in ensuring the company is run correctly. While some of these aspects will involve hiring someone to manage, such as an accountant to handle accounts, there are still some things that must be done by the individual.

Company formation

When a company is formed as a limited company and directors are appointed, the company must register itself with Companies House in London. As a part of this, it will need to have articles of association – in other words a set of rules that everyone within the company adheres to. This applies to directors as well other members of staff. Along with the articles of association, there are several other pieces of information that are required to set up a limited company.

These include the company name and registered address as well as the name and address of any directors as well as a company secretary if there is one. You also need to give details of any shareholders and share capital as well as information about anyone with significant control over the company, say owning 25% or more of the shares or voting rights. Finally, you need a standard industry classification or a SIC code which signifies what the company does.

The director’s address

As part of this list, directors are required to give their name and address and this information is lodged on the public register. But some directors don’t want their home address to be available to the public for various reasons. However, there is an option to use what is called a service address – this can be the public address but can also be another address and this is what is added to the public register. Here at Capital Office, we offer a Director’s Address Service that allows you to use our address as your service address and therefore to keep your home address away from public eyes.

Our address is in a prestigious area of London, but it doesn’t matter where in the country you live to be able to take advantage of it. Our flexible service includes a mail forwarding address so that when you use our address and any official HMRC or Companies House mail arrives, we can forward it on to you at your private home address.

We also have the option to scan mail into our system and email you the content if you are trying to keep physical mail to a minimum. This means there is no delay in you receiving the information within the letters and no risk that it might get lost in the post. The service can be taken in one year periods and includes statutory mail forwarding at no extra cost. You can action the service online and our form takes around five minutes to complete, allowing you to process the payment at the same time.

Full Directors Address Service Features

• Lowest prices guaranteed

• No setup fees

• Instant activation

• Real office building

• Private & confidential

• Real London address

• Parcels accepted

• Post scanning option

• Unlimited mail volume

• Signed for post accepted

• Cheaper than Royal Mail

• Reception for visiting clients

• Worldwide post forwarding

• Collect post from office

• Prestigious address

• Free meeting room use
  

Preparing for company formation

Before you can begin the process of forming a company, there are some decisions to make. If you are establishing a business in a limited form or as an ordinary business partnership, you will need to choose a name for the business. As a sole trader, the business will often be named by the person who owns it, but still the same rules around your official business name apply.

All companies need to be registered with Companies House with a name that complies with the relevant regulations. Their register is the place to check if the name you want to use is currently in use or to ensure that the name isn’t too similar sounding to another company’s name that has already been registered. A private limited company needs to include either the word ‘limited’ or Ltd in their name in the majority of cases. There are also rules about words you cannot use, including words such as ‘royal’ or ‘queen’ as they imply a connection to the royal family.

Forming a limited company

If you think that registering as a limited company may be the best option for your new business, then once you have the name for your business and are certain that you can use it, you can begin the company formation process.

• An address for the company

• Minimum of one director and one shareholder

• Memorandum of association for the company

• Details of the company’s shares

• Articles of association

• Details of anyone with more than 25% control in the company, known as significant control

• The classification code for the business type, known as the SIC code

Once you provide all this information to Companies House, you will receive a Certificate of Incorporation that establishes the company as being a legal entity.

Limited company formation service

Forming a limited company can sometimes look like a complicated process, but it can be made much easier by using a Company Formations service which is offered by Your Virtual Office. Our service involves helping you to complete the relevant documents online to give us the information we need for your business and then we can register this with Companies House. The registration process can take as little as four hours to complete when done during normal working hours. As a result, you will receive your Certificate of Incorporation.

This certificate confirms that your business has been incorporated under the Companies Act 2006 as a legal entity with its own identity. Your Certificate will include the following information:

• Company registration number (CRN).

• Company structure, i.e. limited by shares or limited by guarantee etc.

• Date of incorporation

• Issuing Registrar

• Official seal of the Registrar of Companies (Companies House)

• Registered company name

• The Companies Act 2006

• Where the company is registered, i.e. England and Wales, Scotland or Northern Ireland.

Forming a limited liability partnership

Another alternative form of registration for your business is called a limited liability partnership. In this, some or all of the partners of the business will have limited liability. Unlike a normal limited company, where shareholders all have to share in any debts that the company generates, a limited liability company limits the amount of liability the shareholders stipulated can face. This means that if something does go wrong with the business, shareholders will only be liable for a specified amount of the debt.

This kind of business format is recommended for profit running businesses. LLP businesses need to have at least two members and the responsibilities of these individuals are set out in the Deed of Partnership. One person would be the ‘Designated Member’ who is responsible for the communications with Companies House as well as preparing accounts and acting on behalf of the company if it is dissolved at a later date.

LLP forming service

To form a limited liability company, you can fill in all the necessary paperwork by yourself or you can use our formations service to do the job for you. We can supply blank agreements for the purpose and can take the relevant information required to form the company, including information about the amount of capital each partner will bring to the business, what their roles are and their responsibilities as well as the position if they should ever choose to leave.

Forming a Company Limited by Guarantee

The other form of limited company is called a Company Limited by Guarantee. This is used typically for non-profit organisations that require a legal personality. This type of company is often used for clubs or associations and means that members have a limited liability if the business is wound up, commonly limited to £1.00. This type of business will often also be registered as a charity with the Charity Commission.

In a company limited by guarantee, no shares are issued and the company has members rather than shareholders. Members contribute a membership fee or a subscription payment and have equal voting rights as well as the option to elect a board of directors. Profits are not distributed as dividends but are used to support activities of the club or association. Our Company Formations service can establish a Company Limited by Guarantee and complete the relevant paperwork to send to Companies House as well as help you prepare the Memorandum and Articles for the registration with the Charity Commission.

Other company formation services

As well as these most common options for company formation, Your Virtual Office also offer other services to help you start your business. The Off the Shelf Company service involves using a company identity that has already been prepared and then complete it to make it your own company. The Vintage Companies service involves using the details of a company that has been struck off or dissolved in the last two decades and can be restored via an Order of Court to the Register of Companies at Companies House.

At Your Virtual Office, we have a number of these vintage companies on our records that we can help you restore and use as your own company identity. We can provide details of the companies available and the costs to restore them.

Conclusion

As well as company formation, we can also help with a number of other services that help create your business. These include our Registered Office address service and several virtual office solutions that offer a prestigious London address for your business to use.

What you are taxed on

HMRC counts the following as income that you are liable to be taxed on:

• Money earned from a job

• Money earned from a business

• Being self-employed and earning money through a job, including selling services online

• State benefits

• Pensions including state and person pensions

• Rental income

• Benefits from a job

• Income from a trust

However, there are some things that you aren’t required to pay tax on including:

• Interest on savings under the savings allowance

• Income from tax-exempt accounts such as ISAs

• Company shares dividends up to £5,000

• Some state benefits

• Wins on the National Lottery or premium bonds

• Lodger rent if your house is below the rent a room limit

Personal allowance

Let’s start with the good news – you don’t pay tax on every penny that you earn. In fact, everyone gets a ‘financial personal allowance’ which is a figure that is revised on an annual basis and is the amount of money a person can earn before they start paying taxes. For the 2016-17 period, this amount is £11,000 so until you reach this figure, you don’t have to pay any tax. Once you have earned £11,000, you are then what is called a basic rate income tax payer. So, for every £1 that you earn above this threshold, HMRC takes 20p and you retain the other 80p.

This rate continues until you reach the current figure of £31,786 at which point you are considered to be on the higher tax rate. This means you will pay 40p in every £1 and retain 60p yourself. Should you find yourself earning more than £150,000 then you will be in the additional rate for tax group and the amount take will be 45p in every £1. Should you earn over £120,000 a year, you do not get a personal allowance either.

How to pay tax

When you are employed, your tax is paid through the Pay As You Earn or PAYE system. This also collects National Insurance contributions and a code supplied by HMRC tells an employer how much they need to deduct.

This code takes into account state benefits if you have to pay tax on them. When you are self-employed, you need to complete a Self-Assessment tax return. Everyone who earns more than £2,500 needs to complete this and people who earn a high income through their job may also have to complete self-assessment forms.

How much tax?

When you are self-employed, the big question is always how much tax you will have to pay. While the tax rate does give you an idea, there are other things that can offset this amount and reduce or increase the figure. Whatever the case, the process starts with accurate record keeping.

There are no set rules about how you keep records – they can be recorded on paper, digitally or on a software program. They must be accurate and readable and you can be fined if they are not. Financial records should include any income you have made from your job. But it should also record expenses that you have paid out which can include:

• Travel costs such as parking or bus fares

• Office costs including stationary and telephone bills

• Staff costs for salaries and subcontractors

• Clothing expenses where uniforms or specialists clothing is required

• Official seal of the Registrar of Companies (Companies House)

• Items bought to sell, such as raw materials

• Financial costs including insurance and bank charges

• Costs of the business premises including heating, lighting and business rates

• Advertising or marketing including website costs

Another type of cost is known as capital allowances and this is where you buy something to use for your business. Examples include machinery, equipment, and business vehicles such as cars, lorries, or vans. Some costs need to be broken down into personal and business if the item is used for both – a mobile phone is an example. If your bills are £200 for one year and one third of this was for business while the other two thirds were for personal purposes, then you can only claim for the one third that related to the business. If a business has no premises, for example if you work from home, then there is an option to claim for a proportion of things such as heating, electricity, mortgage or rent and the use of the telephone or internet.

This is worked out on how much of the home is used for business – so if there are eight rooms and the business uses one, it can claim for one eighth of the yearly bills based on you working there full time. All details of expenses must be kept but only the figures are required to be submitted as part of the self-assessment tax return.

When is the payment due?

The deadline for tax payments is 31st January for tax owed for the previous tax year, known as a balancing payment and the first payment on account. If there is a second payment on account, this will be due on 31st July. You can also use a budget plan to pay at intervals during the year to avoid having a single bill. If you don’t pay on time, HMRC can take various steps to collect the money, will add interest onto the account and may also add penalties. If you think you cannot pay a bill when it is due, contact them immediately here to discuss options.

Overview of companies limited by guarantee

A non-profit company can exist for a range of reasons. It may be a charity, a community group, voluntary organisation or an enterprise creating income for social objectives rather than for its own profit. Some profit making businesses can use this format but a limited by shares formation is more suitable for the majority as this allows profits to be distributed to shareholders as dividends. When forming a company limited by guarantee, the business must still be registered with Companies House. But instead of having shareholders to declare, the owners are classed as members and are limited by guarantee, so the company is to be bound by financial guarantees rather than by shares.

This means that surplus business income, or profits made by the company, isn’t distributed to the guarantors but is retained for the aims of the organisation, such as the charity cause or social project. A limited by guarantee company is still viewed as a distinct entity in the eyes of the law so the company is responsible for assets, surplus income and debts in the same way as a regular limited company. Company members are known as guarantors and are protected by limited liability. This means their financial obligation to the company is limited to what they have guaranteed to pay should the company become insolvent. There is no legal liability beyond this for any debts the business has built up.

Owners and managers

In a company limited by guarantee, the members are the owners of the company, referred to as guarantors. There are no shareholders and there can be one or many guarantors, so you can set up your own company limited by guarantee, or you can be involved with other members. When the company is formed, there must be at least one director appointed to be in charge of managing the day to day affairs. Guarantors can be directors so there can be a single person in charge of the company.

Why choose this type of company formation?

There are pros and cons to this kind of company formation that makes it suitable under specific circumstances. For example, when this type of company is used for a charity of other non-profit organisation, information about the company is viewable on the public register and this gives the company a professional image along with complete transparency. It also allows third parties to make informed decisions about becoming involved with the company based on publicly available information.

This has been shown to increase trust in the company and shows great commitment to the cause. Being a LBG company does mean that an annual return must be filed with Companies House and all necessary annual financial reports are delivered to HMRC for tax purposes. Directors are also required to file for Self-assessment each year if they receive any payments from the company and changes to any registered details must be updated accordingly.

Company formation service

Your Virtual Office offers a company formation service for anyone wishing to set up a limited by guarantee company and makes the process simple, straightforward and time efficient. There is an easy to use online form to complete to allow us to gather the correct details to file the relevant information with Companies House to form the company. We can also provide the relevant documentation for you to hold to prove the formation of the company. Once we have all your information in place we can get your company officially registered in as little as four hours during a normal working day. In addition, we can also offer several services that may be of assistance to your new company.

These include our mail forwarding service and the use of a central London address to add further prestige to your professional business image. Our aim is to provide services that allow business owners to concentrate on the purpose of their non-profit company while allowing us to efficiently manage the time-consuming day to day tasks on your behalf.

Who pays corporation tax?

When you register a limited company, you will be due to pay corporation tax. Any foreign company that has a branch or office within the UK will also be required to pay this, as will any club, cooperative or unincorporated association such as a sports club or community group. The thing to remember about corporation tax is that you don’t get a bill for it – the responsibility is on the director to work out, report and pay this tax. When you start as a limited company, the business is also registered for corporation tax.

Within a few weeks of doing this, a letter will be sent to the business’s registered address that contains a form called CT41G. If this hasn’t appeared within three months from the formation of the company, you need to contact HMRC or use their website to note this. Once you have complete this form, you are considered ‘active’ for the payment of corporation tax. The only way to avoid paying corporation tax is if your company is registered as ‘dormant’ with HMRC.

This means you have formed the company but have not started trading yet and therefore there are no profits to be taken into account. As a result, you will not yet be liable to pay corporation tax.

Preparing for payment

In order to know how much you will need to pay, you are required to keep accounting records and to prepare a Company Tax Return. This will include information about the profit and loss for corporation tax and will often be completed by an accountant, though you can also complete the process yourself.

Paperwork will also need to be registered with Companies House at the same time. If you are looking for professional accounting, take a look at our Business Accounting service for an affordable way to keep on top of your accounts. The deadline for these returns is 12 months after the end of the accounting period that it covers. So, for the year April 2016-17, you would need to submit the return by no later than April 2018. If you go over this period, you will face a financial penalty.

The payment

The current rate of corporation tax is 20%, though there are some changes to this for companies involved in oil rights or extractions. You are required to make this payment within nine months of the end of the accounting period to avoid receiving penalties. You will have to pay corporation tax on money the company makes from doing business (trading profits) as well as investments and selling assets for more than they cost, known as chargeable gains. Tax is also paid on profits from outside the UK if the company is based within the UK. If it is based elsewhere, then the payment is only made on the tax made within the UK.

Getting advice

Tax is a complicated area and there can be financial penalties as a minimum if things aren’t done correctly. Therefore, if you are in any doubt about the amount of tax or information required for corporation tax, you should always seek expert advice as quickly as possible. If you cannot make the required payment, contact HMRC at the earliest point to discuss the matter and try to avoid hefty fines being applied to your account.

Why use a trading address service?

One of the most common reasons that businesses use a trading address service is that they don’t have a dedicated business premises. You may be a sole trader who works from home or travels a lot for business, so has no need of a permanent shop, office or industrial unit. Or you may run an online business that needs no warehouse storage or office. You may offer freelance services through the internet to various business clients etc. These all mean you may work independently from home or on the move via WIFI hotspots.

However, your private home address is not a business address and you may not want someone coming to call at your home in relation to your business. Other businesses may find that they don’t want their location divulged for security reasons and may use the service to protect their business location. This is often the case if you don’t have a physical shop for customers to visit and instead dispatch or post items to customers at their own address.

How the service works

Our trading address service works in a very simple manner once it is set up and can be in force in as little as two hours. Our comprehensive service gives you a Central London EC1 address to use as your business address, adding great prestige to the appearance of your business on your documentation and on your website. Our professional trading address service runs from professional offices in the heart of London, and can accept 'Signed For' parcels and even meet clients on your behalf who choose to visit the location. However, the most important part of the service is the mail forwarding aspect.

When you set up your London based trading address as your business address, much of your business mail will come here. Our service is discreet and efficient and allows you to use the address in the centre of London without customers being aware that this isn’t your actual base of operation. Post arrives at our office in your business name and you can either collect it in person, or we can scan it for you and email you the contents.

We can also forward your mail to you – there is an unlimited volume of mail and parcels built into the service. We can forward your mail to anywhere in the world and can also hold parcels for you to collect in person. The service includes same day scan and post dispatch at cheaper postal rates than Royal Mail.

Service at a glance

We offer three different packages to suit your needs – 3 month, 6 month and 12 month. All include the following benefits:

• Use of the EC1 address on all business stationary

• Unlimited mail

• Option to forward, collect or have the mail scanned and emailed to you

• Collection frequencies either same day, weekly or monthly

• No fees to set up

• No hidden costs

In addition to the cost benefits of taking the longer package, the 12-month package also gives you free use of one of our professional meeting rooms for up to two hours so if you want to meet potential clients or business partners in the capital, you can use our smart, unbranded and fully air-conditioned facilities. Our meeting rooms come complete with full rapid speed fibre optic Wi-Fi and cabled Internet solutions. You can sign up for the service online and the form takes around 5 minutes to complete.

Once payment is processed, you can begin to use our address and we will start handling your mail as you stipulate. We use the latest in mail handling technology alongside friendly and experienced staff to offer the best of modern and traditional trading address services.

What is a Limited Company?

A Limited Company is a registered organisation for your business and is responsible in its own right for everything that it does as well as its own finances, meaning that all transactions are kept separate from the personal finances of the person or persons who founded it. Profits made by this business are owned by the company itself, not the individual who owns or runs it, and it is responsible for paying Corporation Taxes on it's profits before any proceeds can be split among those involves with it.

A limited company has members – these are either people or organisations who own shares in the company. It also has directors, the people who are responsible for the day to day running of the company. Directors can also own shares but aren’t required to in order to be a director.

Types of limited company

There are a number of types of limited company that have slightly different formation processes. The most common is called ‘limited by shares’. What this means is that shareholders responsibility for financial liabilities of the company are limited by the value of the shares that they own in. Shareholders will not have their own personal finances or property put at risk should the company get into financial difficulties. An example would be a company that issues 100 shares at £1 each.

Two shareholders have 50 shares each and have paid in full. If the company fails, the most these two shareholders would have to pay towards any outstanding debts would be £50 each as this is the value of the shares they purchased. In addition, company directors are not held personally responsible for any debts that the company builds up and don’t have to pay back any company debts as long as they have done nothing illegal. Another type of limited company is a ‘private company limited by guarantee’. This is normally used by not for profit companies such as sports clubs, schools, charitable organisations, fund raising organisations and community groups.

This is where the members would financially back the company with a small nominal amount of money that would go towards paying off the debts should the company fail. Members would contribute on the knowledge that they wouldn't expect to see any returns on their investment. All profits made by the company would be reinvested back into it and used in its upkeep. Finally, a public limited company is a company trading on the London Stock Exchange or similar public market. Shares would be open for purchase by the public with the aim of making a profit.

Why opt for a limited company?

One of the main reasons for deciding to become a limited company rather than any other option is that the liabilities for the owners are restricted. The sad fact is that businesses do fail, despite the best efforts of those involved. By creating a limited company, you limit the liability for those involved financially. Knowing that your liabilities are limited in this way can give you great peace of mind should something unexpected happen to the company in the future. There is also a fantastic confidence boost to be had from forming a limited company. The legal identity of the company gives great prestige to your business dealings.

The flexibility of a limited company means that it ensures that those involved with the company can change over time without it impacting on the business. Should the company lose a director through retirement or death, then the company will still be able to carry on trading in its own right. There are also some tax benefits open to limited companies that are not available to sole traders. Finally, forming a limited company is quite straightforward, especially when you use a company formation service such as ours. With our help, you can have your business up and running in as little as four hours during any normal working day once the required information is provided.

Forming a limited company

To create a limited company, you need to register your business with Companies House in London. There are several pieces of information that are required as part of this process. You can undertake to do this yourself or you can use our Limited Company Formation service. The following information is required to form a limited company:

• Company name

• Address for the company

• One director and one shareholder minimum

• Memorandum of association

• Details of the company’s shares and anyone with 25% or more control of the company

• Articles of association

• SIC code

You will also need a business account to use for the business that is established before the company is formed. Tax registration is required once the company is formed and a system put in place to record accounts during the year for tax and management purposes.

Company name

The name of the company is a little more complicated than it may first sound. Many people want to call their company after themselves or their location, often wanting to featuring their trade or industry too. but there are stipulations about company names that you have to be aware of. These include not naming your business the same or ‘too alike’ to another company. There are also rules about certain words that cannot be used including ‘royal’ and ‘queen’. Companies House have a full database of what wording you cannot use in your company name and you can check with their Company Name Checker to see if the name you would like to use is available.

Registered Office Address

The registered office address of the business can be where the business is based and where you operate from, your home address or a specific address somewhere else that you have permission to use. This address will be on the public register at Companies House and fully viewable by the general public, so some people prefer not to use their own home address. A registered office address service such as the one provided by Your Virtual Office can allow the business to use our address in London as its registered address.

Memorandum and articles of association

The memorandum of association is an agreement that all shareholders agree to that is a legally binding statement around the formation of the company. Likewise, the articles of association are the rules that govern the company and stipulate how the business will operate. It also includes information about how profits are divided up and what happens if the business is sold.

SIC code

The SIC code (Standard industrial classification of economic activities) is provided by Companies House and details the industry that the business will operate in.

Company formation process

Once this information is gathered together, the process of forming the company can begin. Most of this can be done online via the Companies House website, or you can use a company formation process to ensure that the process will be carried out correctly. Your Virtual Office’s company formation process involves completing an online form via our website where we can collect all the required information needed to form your company.

We will then confirm with you and review all the information to ensure it is correct and accurate. If you get stuck on anything or are unsure of what information to provide, don't worry – we are here to help you with some free guidance should you need it. Once the information is verified, we can complete the process of forming your company and provide you with the documents that you will need to keep. These include:

• Certificate of incorporation

• Copies of the memorandum and articles of association

• Minutes of the first meeting

• Share transfer paperwork

• Copies of all the Companies House forms for your records

• You can then consider any additional services you may require from us including registered office service, mail handling and call answering services.

What happens following formation?

Once you are incorporated, you will be required to prepare your statutory financial accounts each year and submit these to Companies House, along with a Confirmation Statement (this used to be called the Annual Return). If your company is trading and not registered as dormant, then you will need to send HMRC your company tax returns and financial accounts. You will be liable to pay the current rate of corporation tax on your taxable profits.

Professional service

For many businesses, being able to have their calls answered promptly in a professional manner is a huge benefit for their reputation and their bottom line. When you are a small business or perhaps have a busy workplace where phone calls are difficult to take, having someone away from the premises to answer your calls can be a crucial part of your customer service plan. Therefore, we created our call answering service for just this reason. Our call answering service offers unlimited call volumes and the calls are answered in your own business’s name.

This means customers don’t realise they are ringing a call answering service but think they are speaking to the company receptionist or your personal secretary. All the conversations are kept private and run through a secure system so there’s no concern about customers divulging personal or financial data. Sales calls can be taken and any important calls forwarded to a mobile number of your choice to continue the conversion yourself. The team answering your calls are based in our London offices and absolutely no outsourcing is used. Outside of business hours there is a customised voice mail service available to take your calls 24 hours a day and you can choose your own greeting for this as well as how your calls are answered. Once a call has been answered, it can also be forwarded to your business phone system and there is a private pin protected message service so that only you and your chosen employees can access messages.

Why use the service

As well as offering the professional call handling service that every business needs, our call answering service also screens calls to save you precious time. Sales calls from other businesses are a part of everyday life and may be of some interest to you, but often come at the wrong time. Sometimes these calls may not be ones that you are interested in taking. Using our call service allows you to have these calls screened and either forwarded or rearranged as required.

All of our call handlers are native English speakers and will have enough basic background information about your business to be able to conduct a polite and professional conversation with your callers. This means that our service offers the highest standard of professionalism and practicality while saving you the cost of having a full-time permanent secretary or receptionist working on your premises.

Setting up the service

Setting up your call answering service couldn't be simpler! You can set up the service by completing the online form. We have different packages available to suit your requirements, ranging from one to twelve month deals so you can use the service for as long as you require. The set up process takes around 5 minutes and once payment is complete, your personalised call answering service starts within one working day. We will also collect information about your business and all the relevant forwarding data we need. A unique 0207 or 0203 number will be allocated for you to issue to your clients and to use on your contact media, and we will give you your message pin and other essential data immediately.

Full Call Answering Features

• Unlimited Volume of Calls

• No Hidden Call charges

• Calls taken in your name

• Choose your own greeting

• Lowest Prices Guaranteed

• No Setup Fees

• Private & Confidential

• Instant Activation – Start Using Today

• Completely private and secure for all clients

• Unique 0207 or 0203 London Number

• Professional Call Handling

• Forward Calls to your mobile

• Caller questions answered

• Sales calls taken

• London Based PA

• Can take number with you

• Native English Speakers

• Calls Screened

• Award Winning Service

• Real London based team – no outsourcing

• Messages forwarded onto you

• Calls routed live to your phone after PA handling

• 24 Hours customised voice mail

• Private Pin Protected Messages