Tax & Accounting Duties of a Company Director
Updated: Oct 5
Are you a Limited Company Director? There are legal requirements you must keep towards both HMRC and Companies House for tax and accounting.
Accounting & Statutory Accounts
You must keep fit and proper accounting records so as to be able to produce annual financial statements and to prepare and file the Company Corporation Tax return. This means:
all money spent by the company,
all money received by the company,
debts the company owes or is owed,
stock the company owns at the end of the financial year,
records of stock-takes completed to calculate the stock figure,
all goods bought and sold and who you bought and sold them to / from; plus
all other relevant documents e.g. bank statements and correspondence.
These records must be retained for a minimum of 6 years. Failure to keep proper accounting records can lead to a fine of £3,000 or being disqualified as a company director. For a company, the accounts and tax return are prepared on the basis of the same 12 months being your company financial year. The first accounts of a new company are due 21 months after the company's registration date at Companies House, thereafter annual accounts are due 9 months after your company's financial year ends. Note: while Companies House usually only require an extract of the accounts, full accounts are required by HMRC.
Your company will be registered at Companies House and you must keep Companies House informed on certain key information and changes. Central to this is the 'annual return' or 'confirmation statement'. This is an annual check that the information Companies House holds about your company is correct - including registered office, Directors, Secretary, capital, shareholders, SIC code and people with significant control. It's first due one year after incorporation. You can be fined up to £5,000 for failing to send your confirmation statement and your company may be struck off.
Your company Tax Return is calculated based on the profits of the company as shown in its annual accounts. You must prepare a tax return even if the company has a loss. The deadline for paying your corporation tax bill is 9 months and one day after the end of the accounting period (so the day after you file your annual accounts). Filing of the corporation tax return is due 12 months after the end of your accounting period. Penalties for late filing start to accrue after just one day and increase in increments as time goes by. Repeated failure to file on time leads to increased penalties. Penalties can therefore accumulate to significant amounts - always contact HMRC if there is a problem with filing on time.
If your company turnover (sales) will exceed £85,000 in any 12 month rolling period you must register for VAT. Once registered for VAT you must charge the appropriate rate of VAT on your goods and services and keep accurate records of VAT paid and collected in order to submit regular VAT returns to HMRC and pay over the net amounts due. VAT is a complex area and you should seek advice to ensure you are applying the correct rates of VAT for your business and adopt a payment scheme which fits for your company. Again there are penalties and surcharges if you fail to submit a tax return and / or pay over the correct amount of VAT on time. These can add up quite quickly so its important that you know what your deadlines are and have the right processes in place to be able to meet them. See article: The lowdown on VAT
If you have employees...
You need to register as an employer with HMRC when you start employing staff or using subcontractors for construction work. You must register before the first payday. Thereafter you will need to inform HMRC when you take on each and every new employee. You will need to operate a 'Real Time Information' (RTI) PAYE payroll (unless your employees earn less than £120 per week) which deducts income tax and national insurance from your employees salaries and pass this to HMRC. The company will also be required to pay Employers National Insurance (Class 1 NICs) to HMRC. You may be able to offset £4,000 pa 'Employment allowance' against your Class 1 NICs if your Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.
You will also have a duty to provide forms upon certain events:
A P45 when an employee stops working for you showing how much tax that employee paid on their salary. One copy is sent to HMRC, one to your employee. You must provide this form by law.
A P60 to each employee by 31st May each year. A P60 shows how much tax was paid by the employee on their salary for the tax year just finished.
A P11D in respect of each employee receiving 'benefits in kind'. This is sent to HMRC and you may wish to provide copies to your employees too.
Self Assessment Tax Return
A a company Director you may also have to complete a self assessment tax return detailing all your income including any from the company (e.g. salary or dividends). See article; Self-employed - 6 things not to miss for self-assessment