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If you start a Limited Company, you should be prepared to deal with a lot of responsibilities. You will be responsible for running and growing the business as well as all managing the administrative functions associated with the business. Things are particularly more challenging for one-man Limited Companies.
Fortunately, you don't have to do everything by yourself. The increase in the number of Limited Companies in the UK has led to a rise in many services that are aimed at supporting Limited Companies.
In this article of 'Path of Education for New Contractors,' we look at some of the legal and accounting functions that can be outsourced, so that you can better focus on your core activities.
While it's very easy to form a company in the UK, there are a series of steps involved in this process. One important step is to find a unique name for your company because as per UK laws, no two limited companies can have the same name. You will find service providers who can register your company within 24 hours.
Some service providers offer different types of company formation packages. The basic package may include an online registration of the company with Companies House, a digital certificate of incorporation and a digital Memorandum & Articles of Association. Advanced packages may include extras like digital share certificates, VAT registration, PAYE registration, and even minutes of the first board meeting.
Every company in the UK is legally required to have a registered office address. Importantly, the office address has to be real, and not a PO box number. If you are a one-man Limited Company operating out of your home, you should note that the registered office address is available for public display to anyone who searches for your company. This could be an issue for Limited Company Directors who don't want to display their residential address to public.
Also, your registered office address is displayed on your website and marketing material. Most prospective customers form a first impression about the business based on its address. If your address is in a residential locality, it may not create a professional first impression for potential clients.
In such cases, you can opt for a registered office service, in which the service provider offers a registered office address. You also get mail forwarding service so that all your mails are forwarded to your residential or actual address. Some providers even provide with prestigious London addresses.
Registered office services are also useful for Limited Company Directors who are living overseas.
Till 2008, it was compulsory for every Limited Company to have a company secretary. Some of the responsibilities of the company secretary were managing the office address, creating the minutes of board meetings, managing share registers, filing of annual returns with the Companies House, and communication with shareholders.
Post 2008, Limited Companies have a choice whether or not to hire a company secretary. If they don't have a company secretary, the Director is responsible for all the functions, which were earlier carried out by the company secretary. There are many service providers who offer Company Secretarial services at a fixed yearly fee.
Limited Companies are required to inform Her Majesty Revenues and Customs (HMRC) in real-time about any payments made to any of their employees. This is applicable even to one-man Limited Companies. Other payroll functions include one-time registration of the company's PAYE (Pay as You Earn) scheme with the HMRC, issuing of payslips, and managing any changes in tax codes. You will find many companies who can perform all essential payroll functions, thus freeing up your time for core business activities.
New contractors find it very difficult to come to terms with accounting requirements of a Limited Company.
You are required to raise invoices to clients, keep a track of all the income and expenses, maintain records of VAT returns, and collect money from clients, among others. Some of these activities are legal requirements as you need to send your updated accounts to HMRC every year. People who are not from a financial or accounting background find it very difficult to keep their accounts up-to-date. Even if you have accounting knowledge, you will have to spend too much time on these activities.
You will find many accounting companies who can manage all your book-keeping functions and keep your accounts up-to-date on a regular basis. This way, you don't have to run around at the time of filing your annual accounts with the HMRC.
Another advantage of using a professional accounting firm is that they will advise you on different transactions such as Director's loans, dividends, and so on. Remember, the Limited Company is a separate legal entity, and you need to follow certain processes to withdraw money. A professional accounting firm will advise you on how to conduct transactions in the most tax-efficient manner. You can also plan your taxes in advance to avoid any future shocks.
In addition to submitting their accounts, Limited Companies are required to file corporation tax returns with the HMRC every year. Also, if their revenues are above threshold, they need to submit their VAT returns every three months. And that's not all; all payroll related transactions, which involve statutory deductions such as personal income tax or National Insurance need to be reported to HMRC in real-time.
Apart from various filings related to the company, Directors also have to file their personal income taxes with the HMRC. If you engage a professional accounting firm, you don't have to worry about any correspondence with the HMRC.
Your Limited Company may generate very high revenues, but it won't mean anything unless you collect cash from your clients. Many service providers specialize in debt collections, including recovering debt from international customers and helping in enforcing any County Court Judgments if debtors are not paying even after a court order. Some service providers also provide supporting services such as tracing missing debtors and searching if there are any County Court or High Court Judgements against any companies or individuals.
All of the above-mentioned functions are entirely critical, and you cannot afford to miss out on any of these. If contractors decide to do these things on their own, they will have to spend a lot of time. So it's a good idea to outsource some of these functions to professionals.
Many companies offer comprehensive packages, which include a combination of all of these services. Tempo is one such specialist provider of accounting services for Limited Companies. They offer registered office, company secretarial, and company formation services. Apart from offering these services individually, Tempo also offer a combination of these functions as part of their Limited Company and Limited Company Gold services.
You may also find the following contractor calculators useful for your salary and tax calculations.
If you are looking for accounting support with your new limited company or if you need support setting up your accounts as a contractor, iCalculator recommends Tempo, a solid, dependable company that the team at iCalculator have known and worked with since 2009.