Limited company rules
Limited company name rules
When you set up a limited company, you should take note of the naming rules set out by the Companies Act. If any of these rules aren’t observed, it’s likely that your name will not be approved.
Your limited company’s name:
- Must be unique. In other words, it may not be the same as a name that’s already registered on the index of company names.
- Must have "Ltd." or “Limited” behind the name, for example: Gemini PC Repairs Ltd.
- May be changed in the future, but the company registration number may not.
- Must not contain offensive or abusive words, or words relating to illegal activities.
- May not contain trademarked words, for instance, “Juno Jacuzzi Repairs,” cannot be used as the word 'Jacuzzi' is a trademark.
- May not include any “sensitive” words in your name unless you have received official permission.*
* Sensitive words include Adjudicator, Commission, Foundation and Trust. See Companies House for a full list of sensitive words
Limited company address rules
For limited company formation you must have a registered office address. This is the where Companies House and HM Revenue & Customs (HMRC) send official documentation or correspondence. It doesn't have to be the same as the place of operation; it can be your home address or the home address of one of the directors
As long as it’s:
Limited company dividend rules
The most beneficial way to take income as the director of a limited company is to give yourself a low salary (salary payments are taxed with PAYE and National Insurance) and get paid via dividends. This is the division of profits among the limited company’s shareholders.
If you do this, you should take note of the following:
- The decision to take dividends must be approved by all company shareholders, as specified in your limited company's Articles of Association.
- Dividends can be distributed at any time, as long as there's enough "retained earnings" available. Dividends declared when the company is in the red are called illegal dividends*.
- At the end of your tax year, you must make sure that the total of all your dividends taken have been covered by profits earned by the company after all expenditure (including salaries) and corporation tax have been paid – this is also
the formula for retained earnings.
* Dividends that are paid even though the accounts of the company show negative retained earnings.
We offer specialist, personalised, end-to-end accounting and tax advice.
Limited company accounting requirements
- You may not operate as a limited company until the business has been incorporated at Companies House under the Companies Act 2006.
- The directors of a limited company must file certain documents every year, including ltd company annual accounts and an annual tax return.
- It is the director’s duty to inform Companies House about any changes, for instance when a director resigns or is appointed or if the company’s registered office is changed.
Limited company annual accounts
You’ll need to prepare your limited company annual accounts at the end of your limited company’s financial year.
Your accounts must be sent to:
- Shareholders
- Attendees of your general meetings
- HM Revenue & Customs (HMRC) (with your Company Tax Return)
- Companies House
Your statutory accounts must include:
- A balance sheet
- Profit and loss account
- Account notes
- Director’s report
If you use our monthly service, we’ll prepare all of these accounts for you. This is a time-saver for many contractors, because it reduces the hassle and stress of financial admin.
Your annual accounts need to meet these standards:
- International Financial Reporting Standards
- UK Generally Accepted Accounting Practices
We offer specialist, personalised, end-to-end accounting and tax advice.
Common tax and filing deadlines
Here are some of the most important tax and filing deadlines that you need to keep in mind throughout the year. Missing any of these deadlines could lead to heavy penalties, so ensure that you set reminders and keep up to date with your filing obligations.
| What is due | Due date |
|---|---|
| File first accounts with Companies House | 21 months after the date you registered with Companies House |
| File annual accounts with Companies House | 9 months after your company’s financial year ends |
| Pay Corporation Tax or tell HMRC that your limited company doesn’t owe any | 9 months and one day after your ‘accounting period’ for Corporation Tax ends |
| File a Company Tax Return | 12 months after your accounting period for Corporation Tax ends |
| Self Assessment tax return | 31 January |
For assistance meeting any of these deadlines, simply fill in the form on the bottom of this page and one of our contractor accountants will get in touch with you.
Small companies and micro entities
To qualify for an audit exemption, your company needs to be classified as “small”. See the guidance by Companies House here.
A micro entity has:
- A turnover of £632,000 or under
- £316,000 or less on its balance sheet
- 10 employees or fewer
A small company has:
- A turnover of £10.2 million or under
- £5.1 million or less on its balance sheet
- 50 employees or fewer
If your company is classified as micro, you’ll be able to:
- Prepare simpler accounts that meet statutory minimum requirements
- Send only your balance sheet with less information to Companies House
- Benefit from the same exemptions available to small companies
If your company is classified as small, you’ll be able to:
- Use the exemption so your company’s accounts do not need to be audited
- Choose whether or not to send a copy of the director’s report and profit and loss account to Companies House
- Send abridged accounts to Companies House
A small company’s tax return includes:
- Form CT600
- Your Corporation Tax calculations
- Your statutory accounts If you incurred a trading loss
One of the good things about a trading loss is that it reduces your Corporation Tax bill. This means that if you’ve made losses that you can’t claim back in one tax return (simply because they’re too big)
you can either:
- Claim the loss against last year’s profit
- Claim the loss in the next financial year
If you want to claim the loss against your previous year’s profit,
you can either:
- Fill in the box on your Company Tax Return
- Write to your HMRC Corporation Tax office
We offer specialist, personalised, end-to-end accounting and tax advice.
Limited company legal requirements
We’ve helped thousands of contractors set up limited companies and we can make sure that you get yours right, first time. Below is a rundown on some of the basic legal requirements you must fulfil when starting a limited company.
Articles of Association
With our expert contractor tax advice we’ll ensure that you minimize your liabilities and always stay on the right side of HMRC and the tax man.
Memorandum of Association
The Memorandum of Association includes the company’s name, office location and the number of shares in the limited company.
Directors and company secretary
If you do have a company secretary, he or she must make sure that your returns and statutory requirements are completed, signed and deposited annually.
Registered office
This is the physical address where the company's statutory records are kept. In other words, it’s the address where legal documents can be served if need be. It doesn’t have to be where the company will conduct business, but every company registered in the UK must also have its registered office in the UK.
We offer specialist, personalised, end-to-end accounting and tax advice.
Limited company insurance
If you’re the director of a limited company, you should, and sometimes are legally required, to insure your operation. Insurance will cover you in the event that something happens to you, your staff, a client or a third party.
There are three main types of insurance that ought to be considered when you own and operate a limited company.
1. Professional Indemnity Insurance (PI)
If your company gives professional advice to third parties, you should consider getting PI. This insurance will cover you in cases where claims of negligence are brought against you and your company.
2. Employers liability insurance
UK companies are required by law to have employers liability insurance. This insurance covers your business in the event that an employee brings an action against your company related to sickness or injury that they suffered as a direct result of work they carried out for their employer. If you are the only employee of your own company, i.e. you are the director and sole employer of your company, you are not legally required to have this insurance. However, many agencies and clients may require you to have this insurance.
3. Public liability insurance
Also known as third party liability insurance, this type of insurance covers incidents involving members of the public, not associated with your business, that are suing you because of something your business has done to cause harm to them.
Disclaimer: The PI policies available through Sable Private Wealth Management are provided by Caunce O’Hara & Co. Limited, an independent insurance broker, who is authorised and regulated by the Financial Conduct Authority under firm’s reference 306183. Sable Private Wealth Management do not provide advice on the policies offered by Caunce O’Hara. Any questions or enquiries regarding such policies should be directed to Caunce O’Hara via phone, +44 (0) 33 3321 1403 or email, info@caunceohara.co.uk.
Limited company FAQs
We get a lot of queries about limited companies. Here are some of the answers to the most frequently asked questions.
1. Closing a limited company
1.1 What is required to close a limited company?
This is the general process necessary for closing a limited company:
- You file accounts for the final period of trade to HM Revenue & Customs (HMRC) and Companies House.
- You pay any final tax liabilities.
- You pay out any retained earnings to stakeholders and close the PAYE, Corporation Tax and VAT schemes (often filing a final VAT return in the process).
- The company bank account(s) need to be closed.
- You file a DS01 to Companies House to strike the company off the register.
1.2 How much does it cost to close a limited company?
This depends on what needs to be done, but it can take as little as one week if your accountant has everything he/she needs. This excludes the strike-off at Companies House which can take about 3-6 months.
1.3 How long does it take to close a limited company?
This depends on what needs to be done, but it can take as little as one week if your accountant has everything he/she needs. This excludes the strike-off at Companies House which can take about 3-6 months.
1.4 What is formal liquidation?
If your company has more than £25,000 retained, you may need to go through a formal liquidation process, or the winding up of a company, when you want to close it.
This formal procedure does cost money, but since every person’s circumstances are different, you need to speak to your accountant to find out more about your specific case.
2. Corporation Tax
2.1 What is Corporation Tax?
This is tax that gets charged on a company’s profits.
2.2 What is a Corporation Tax return?
This is a return that explains the calculation of your Corporation Tax and is filed alongside your company's accounts to HMRC.
3. All about expenses
3.1 What expenses can I claim through the limited company?
You can claim any expense that is wholly and exclusively related to the activities of the business. This might include travel to and from your client, home office expenses, or mobile phones.
3.2 What is the difference between claimable and reimbursable expenses?
- Claimable expenses are expenses usually incurred by your company during normal operations.
- Reimbursable expenses are normally incurred in unusual circumstances, for example: If your client needs you to travel abroad and agrees to reimburse you for that extra expense.
3.3 Do I need to keep receipts?
You need to keep all company records, including receipts, for seven years - in case HMRC ever asks to see them.
4. PAYE
4.1 What is a P45?
A P45 is a form that your employer issues you with. It shows what you've been paid in salary for that year so far as well as the amount in taxes that has been deducted. Usually a P45 consists of three parts:
- One part goes to HMRC
- Your new employer gets one
- You keep one
4.2 What is a P60?
A P60 is a form issued by your employer at the end of the tax year - usually around May. It shows your employer details, what you have been paid in salary for the preceding tax year (6 April – 5 April) and the amount in taxes that has been deducted.
4.3 What is a P11d?
If you have been paid in salary for the preceding tax year (6 April – 5 April) and the amount in taxes that has been deducted.
5. Retained earnings
5.1 What are retained earnings?
Sometimes you won’t need to draw out all the earnings available to you from your company. Whatever is left behind (after expenses, taxes and dividends) is called retained earnings. Retained earnings may be drawn out later by the director/s or perhaps invested by the company.
5.2 How do I withdraw my retained earnings?
You can usually do this in the form of salary, dividends or capital gains (on closure of the company). You need to speak to an accountant to find out how to do this in the most tax-efficient way, as it will depend on your circumstances and future plans.
6. Due dates for tax returns and accounts
6.1 Corporation Tax return
This needs to be filed with HMRC within twelve months of your company year-end however, the payment of any taxes is due by nine months after the company year-end.
6.2 Financial accounts/statements
These need to be filed within nine months of your company year-end with both HMRC and Companies House.
6.3 P11d
Refers to benefits paid to any employees by the employer, such as a company car, must be reported to HMRC. This is due by 6 July to cover the previous tax year period (6 April – 5 April).
6.4 VAT returns
You need to submit these for quarters (three months). They are due before the end of the month following the end of a quarter.
6.5 Personal tax return (self assessment)
This is due by 31 Jan to cover the previous tax year period (6 April – 5 April).
7. VAT
7.1 How do I charge VAT?
If you are VAT-registered (i.e. you have a VAT Certificate), you simply add 20% to your invoice. You need to display this amount as a separate amount on an invoice and your client needs to see your VAT number on the invoice.
7.2 What is flat-rate VAT?
HMRC introduced this scheme a number of years ago to simplify and speed up the filing of VAT returns. You get to keep a small portion of the VAT you have invoiced for, although you cannot deduct VAT that you have paid out on your return, except for capital expenditure (over £2,000 at a time).
We offer specialist, personalised, end-to-end accounting and tax advice
We offer specialist, personalised, end-to-end accounting and tax advice.