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New Business Owner? Accounting Obligations for Limited Companies

February 15, 2021 9:06 am Published by

Good news was hard to come by in 2020, but recent government data on new company formations has shown that the UK’s entrepreneurial spirit is flourishing.

Based on government data, 2020 is likely to be the best year on record for new business creation – with an estimated 84,758 extra companies created in comparison to 2019.

COVID-19 has been a contributing factor to this increase in the number of companies created, with employees on furlough and those that have been made redundant turning their hobbies or side gigs into full-time endeavours.

If you are now the owner of a small limited company, our latest blog post explains your key accounting obligations to ensure you are not penalised by HMRC.

Record Keeping

Record keeping is essential to the running of a limited company. As well as ensuring your business runs efficiently, proper record keeping is also essential for filling out your tax returns.

Failure to keep accounting records can result in a fine of £3,000 from HMRC and disqualification as a company director. The types of records you should keep include:

  • Company Records – Including details of directors, shareholders, and company secretaries.
  • Accounting Records – Including all money received and spent by the company, details of assets owned, and any debts owed.
  • Register of PSC – You must keep a register of ‘people with significant control’ (PSC).

You must keep records for 6 years from the end of the last financial year they relate to. A full list of financial records you must keep can be found here.

Filing Accounts and Tax Returns

As the director of a private limited company, you will be responsible for preparing and submitting annual accounts and tax returns to HMRC and Companies House.

  • Annual Accounts – Known as statutory accounts, annual accounts are prepared from financial records and include a balance sheet, a profit and loss account, notes about the account and a director’s report.
  • Company Tax Returns – If your company receives a ‘notice to deliver a Company Tax Return’ you must file a Company Tax Return. Filing a tax return involves working out your profit or loss for Corporation Tax and your resulting Corporation Tax bill.

Failing to submit your annual accounts and company tax returns on time will result in a late filing penalty fee.

Reporting Changes & Checking Confirmation Statement

As a limited company, several changes must be reported to HMRC & Companies House if they occur to ensure that information on file is kept up to date.

These include a change to your registered office address, changes to directors and secretaries and changes to people with significant control (PSC).

To ensure that other details of the business are kept up to date, every company must check their business confirmation statement at least once a year, this details all the information that Companies House has about your company.

Before filing the confirmation statement, you should check the details currently held about your business and update your records if anything is incorrect.

You can find out more about filing accounts and your Company Tax Return on the GOV.UK website.

Hiring Your First Employee  

If your business enjoys success and growth, you may look to hire your first employee to ensure that you can continue to meet customer demand whilst developing the business.

Becoming an employer introduces a range of new obligations to you including payroll, checking the employee has the legal right to work in the UK, auto-enrolment, registering as an employer with HMRC and more.

To find out more about hiring an employee, take a look at our dedicated post on getting your business ready for its first employee.

Paying Yourself  

After all the hard work you’ve put into your new company, it’s important to understand how you can pay yourself some of the income generated.

Taking money out of a limited company to pay yourself can be done through a salary, dividend or a director’s loan.

There are methods of being paid by your company which are more tax-efficient than others – an accountant can help you determine the best way to take money from your limited company.

More information about the methods of taking money out of a limited company can be found on the GOV.UK website.

Talk to the Experts  

If you are the director of a small limited company, hiring an accountant can save you time and stress – allowing you to spend more time focussing on your business.

At FCF, we offer a complete accountancy and outsourced payroll service for small businesses and can ensure you fulfil all of your legal accounting obligations as a limited company director.

To schedule a free, no-obligation consultation with one of our team and discuss your requirements – give us a call today on 0117 379 0810 or fill out a contact form and we will get back to you.


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This post was written by Steph Roffey

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