Frequently Asked Questions

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Company Formations

It is now permitted to have as few as one Director in a Limited Company.

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Yes. Each Director must be at least 16 years old and at least one Director must be a person

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Yes. A Company must have an address in the country where it is registered.

A Company registered in England or Wales must have a registered office address in one of those two countries.

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No. A private Limited Company no longer needs a Company Secretary.

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A private Company limited by shares must have at least one shareholder but there is no maximum number of shareholders.

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A private company limited by shares can start with as few as one share. It can increase its share capital if it needs to

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Pay As You Earn (PAYE)

In most cases you will need to register your business for with HMRC if your business employs staff (including Directors). You will need to set up a PAYE scheme which is done with HMRC. The easiest way to do this is electronically.

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The normal date by which you have to pay is 19th day of the month. As a PAYE month ends on the 5th day this gives you 14 days in which to make the payment. If payments are made electronically you have an extra 3 days to make the payment.

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Each taxpayer has a tax free allowance in the current tax year (2016/17) of £11000. This averages out at £211.53 each week. So if they earn less than £211.53 each week and have no other source of income they will not pay any tax.

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On 1 April 2017 minimum wage rates increase.  The new rates hourly rates are as follows:

Aged 25 and over  £7.50

Aged 21 to 24        £7.05

Aged 18 to 20        £5.60

Under 18                £4.05

Apprentice             £3.50

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The law relating to pension schemes has changed. Under the Pensions Act 2008, every employer in the UK must put certain staff into a pension scheme and contribute towards it. This is called 'automatic enrolment'.

Whether you're an Accountant, a hairdresser or employ a personal care assistant, if you employ at least one person you are an employer and you have certain legal duties.

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There are a number of ways to pay your PAYE and NIC. It is quick and easy to do so.

You can pay online, or by telephone banking. You can pay in person at your bank or the post office. You can pay by direct debit or by cheque through the post. You choose the method that suits you best.

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Personal Tax

You may need to complete a tax return if any one of the following applies to you:

- You are self employed

- You are a Director of a Company

- You have an income which is not taxed at source, such as income from property

- You are a partner in a business

- You are a higher rate taxpayer

- You have significant investment income such as bank interest or dividends


If HMRC send a tax return to you must complete it.

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Each starts on 6 April and ends on 5 April.

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Tax returns are normally issued on 6 April each year. If you file your tax return electronically you must file it no later than 31 January following its issue.

If you file a paper tax return it must be filed no later than 31 October following its issue.

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You will receive a late filing penalty. The amount of the penalty will depend on how late your tax return is filed. A penalty of £100 is levied if your tax return is up to 3 months late.

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The tax liability generally falls due to be paid on 31 January following the end of the tax year. You may need to make interim tax payments in certain circumstances. These are called payments on account. Hey fall due to be paid (usually in equal instalments) on 31 January and 31 July following the end of the tax year.

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There are a number of ways to pay your self assessment tax liability. It is quick and easy to do so.

You can pay online, or by telephone banking. You can pay in person at your bank or the post office. You can pay by direct debit or by cheque through the post. You choose the method that suits you best.

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Tax Enquiries

A tax enquiry is the system by which HMRC check in detail that the information on a tax return is both correct and complete. They do this by asking questions about your return, through correspondence, meetings and reviewing your records. HM Revenue and Customs has the right to open an enquiry into any return.

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HMRC can select any return for an enquiry. You must therefore keep all the documents and information you used to prepare your tax return until the time allowed for HMRC to start an enquiry has passed. If you fail to keep the records for the required period you may face a penalty of up to £3000.

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Your return may be one which is selected at random. HMRC usually select on the basis of risk which may be because of the type of work you do or your different types of income. There are many sources of information which are available to HMRC. Sources include, employer returns, information from banks about interest paid, information from other parts of HMRC such as stamp duty land tax about property sales. HMRC might receive information from the general public or from its enquiries in to other businesses. So HMRC may have information which makes it suspect that  your return may not be correct or complete.

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The enquiry may be either a full enquiry, which checks the whole or an aspect enquiry.

An aspect enquiry checks the information on one or more specific points. For instance, HMRC may have information perhaps about income from a rented property which is not consistent with the information on your return. It may ask you for more information or explanations about this property and the source of the income.

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HMRC must follow detailed procedures when conducting an enquiry. It must write to you to tell you that your return has been selected for an enquiry. It must do this within the time allowed by law. HMRC normally has 12 months from the date you filed your return to notify you it is enquiring into your tax return. If you file your return after 31 January, HMRC may longer to start the enquiry.

The enquiry is likely to involve asking for information, documents and explanations in relation to the information in your tax return. You may also be asked to attend a meeting, as HMRC is likely to say that this offers a good way for you to explain anything that is unclear.

If your tax return is selected for enquiry you should seek professional assistance.

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VAT

In most cases you will need to register your business for vat if your annual turnover exceeds a specified level (currently £83000).  There may be other circumstances in which you will need to register for vat.

If you are buying a business as a going concern and it is already registered for vat you will need to register your business for vat even if you think the turnover will not reach the level referred to above.

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You can complete an electronic registration application or you can complete a paper application (VAT1).

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It varies. Some applications can be processed more quickly than others and you may receive your vat registration number in a matter of days. Others may take longer.

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Most businesses file their vat returns quarterly. When you complete your vat registration form, you can apply for a quarter end date that suits your circumstances.

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Most vat returns have to be filed electronically no later than 7 days after the end of the month following the quarter end.

So for example if your quarter end date is 31 March, you will need to file your vat return no later than 7 May.

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The easiest way to pay your vat is to set up a Direct Debit. Once this is set up the payment will be taken out of your bank account by HMRC usually 3 to 5 days after the last filing date.

So for example if your quarter end date is 31 March, you must file your return by 7 May and payment will usually be taken by Direct Debit between 9 and 12 May.

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Inheritance Tax Planning

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who has passed away.

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No. There’s normally no Inheritance Tax to pay if the value of your estate is below the £325,000 threshold or you leave everything to your spouse or civil partner, a charity or a community amateur sports club

If you are married or in a civil partnership and your estate is worth less than £325,000, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £650,000.

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The standard Inheritance Tax rate is 40%. It is only charged on the part of your estate that is above the £325,000 threshold.

Example Your estate is worth £600,000. The Inheritance Tax charged will be 40% of £275,000 (£600,000 minus £325,000). The amount of tax to pay will be £110,000.

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Some gifts you give while you are may be taxed after your death. Depending on when you gave the gift, ‘taper relief’ might mean the Inheritance Tax charged is less than 40%.

Other reliefs, such as Business Relief, allow some assets to be passed on free of Inheritance Tax or with a reduced tax liability.

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Funds from your estate are used to pay Inheritance Tax to HM Revenue and Customs (HMRC). This is done by the person dealing with the estate (called the ‘executor’, if there is a will).

Your beneficiaries (the people who inherit your estate) do not normally pay tax on the gifts they inherit. They may have related taxes to pay, for example if they get rental income from a house left to them in a will.

People you give gifts to might have to pay Inheritance Tax, but only if you give away more than £325,000 and die within 7 years.

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You must pay Inheritance Tax by the end of the sixth month after the person died.

There are a number of ways to pay your PAYE and NIC. It is quick and easy to do so.

You can pay online, or by telephone banking. You can pay in person at your bank or the post office. You can pay by direct debit or by cheque through the post. You choose the method that suits you best.

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Contractors and IR35

IR35 is tax legislation is designed to combat tax avoidance by workers supplying their services to clients via a third party (often referred to as an intermediary), such as a limited company, but who would otherwise be an employee if the intermediary was not used. Such workers are often called 'disguised employees' by Her Majesty's Revenue and Customs (HMRC).

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A "disguised employee" is a contractual worker who fills a permanent position in a business but pays less tax income tax and National Insurance contributions (NIC) than an equivalent permanent worker.

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Many contractors choose to work for clients using their own limited companies, sometimes referred to by HMRC as 'personal service companies'. They do so for many reasons, often because their clients and recruitment agencies refuse to hire the self-employed, which leaves contractors outside of IR35 with few choices.

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The intermediaries’ legislation, commonly known as "IR35", was introduced with effect from 6 April 2000 to counter the avoidance of employed levels of tax and national insurance by individuals providing their services through intermediaries.

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Essentially, IR35 affects all contractors who do not meet HMRC's definition of 'self employment'.

The IR35 rules will result in an increased tax and N.I. liability and will prevent contractor companies from retaining profits to grow their business in the future.

Those contractors who fall under the IR35 rules will be liable to additional levels of tax and national insurance contributions.

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The question as to whether someone is genuinely self- employed is one which can only be answered after a careful examination of all the facts.

It is possible to have one engagement which is caught by the IR35 legislation and another which is not.

You should therefore seek professional advice and with careful planning it may be possible to avoid the IR35 trap altogether.

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Company Accounts

Yes. Every Company must prepare Accounts each year and they must be filed at Companies House and with HMRC.

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The Accounts are submitted to Companies House. Companies House has to make these Accounts available publicly so any one can examine the Accounts by searching the Companies House website.

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The Accounts that are submitted to Companies House are usually an abridged version of the full Accounts. The information that is shown on the abridged version of the Accounts is limited and is unlikely to cause damage to your business. The full Accounts are only submitted to HMRC along with the Company tax return.

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Yes. Your Accountant will help you to determine how often you need to formally prepare additional Accounts. These are sometimes referred to as Management Accounts.

As your business grows you will find you need more regular information to help you control that growth. You may have additional Accounts prepared every three months or even monthly as the business develops.

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Your first Accounts must be filed at Companies House no later than 21 months after the date you registered with Companies House.

Subsequent Accounts must be filed at Companies House no later than 9 months after your company’s financial year ends.

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There are harsh penalties for late filing of Company Accounts.

Penalties for late filing:

Time after the deadline                      Penalty (for private limited companies)

Up to 1 month                                       £150

1 to 3 months                                        £375

3 to 6 months                                        £750 

More than 6 months                             £1500

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