Forming a company

Overview and checklist on the process of a forming a company. Read our easy-to-follow guide on how to set up your company and stay on the right side of HMRC.

Registering a Company

You can set up a company yourself, in which case you get a starter pack from Companies House. A company must have at least one director and will normally have a company secretary (who may be one of the directors).

A company cannot start to trade until registered with the Registrar of Companies at Companies House. If you use a solicitor, accountant or other agent, they will handle this for you. Otherwise you currently need to send in:

  • Memorandum of association. Among other requirements, this should state the name of the company and the intended location of the registered office.
  • Articles of association. This should have the detailed rules about internal management of the company. If you don’t draw up your own articles, the standard format set out in the Companies Act will be adopted. You can also buy a memorandum and articles of association from law stationers.
  • Form 10 – notification of the first directors and secretary (if you have one) and the intended location of the registered office. You should also send in details of any director’s business occupation, nationality and other directorships held within the past five years.
  • Form 12 – declaration of compliance.
  • Registration fee of £40 (or £100 if you are using the same-day service) – N.B. You can also register online if your company is limited by shares and uses standard articles of association (‘model articles’). It costs £12 and has the advantage of being completed within 24 hours.

For more information visit Companies House website.

The right paperwork

Once your limited company is registered, Companies House will inform HMRC. This applies whether you start your business as a limited company or change from a sole trader or partnership to a limited company. It also applies whether or not your company is active or has started trading.

HMRC will then send you an introductory pack within six weeks. This pack contains corporation tax forms and explanatory notes for new companies – including form CT41G (new company details). The pack is usually sent to your company’s registered office, which may or may not be the same address that you trade from.

You should complete and send the form to your corporation tax office as soon as possible. If your company is dormant you should complete form CT41G (dormant company insert) instead. If you didn’t receive the introductory pack from HMRC or you’ve lost it, you can download the form and return it to HMRC.

Already active

The law says that you must give HMRC certain information within three months of the newly formed company starting its first accounting period. An accounting period starts when a company becomes liable to pay corporation tax –broadly, when it begins any business activity. For example, an accounting period begins as soon as a company acquires a source of income, such as starting up a business or acquiring an investment or any other asset, which will produce income or may be sold.

If you’re not sure whether the company is liable to pay corporation tax, ask your advisor if you have one or contact the HMRC office. You can give HMRC all the information it needs by filling in the form CT41G. Send this information as soon as possible. There are penalties for not providing it, which can be as much at £300 plus a continuing daily penalty of £60 for every day that the information remains outstanding. There can also be a penalty of up to £3,000 if the company fraudulently or negligently gives incorrect information.

Not trading

HMRC treat a company as dormant if it has not started any business activity. It’s in your interests to tell HMRC if your company is dormant so that it doesn’t send you unnecessary correspondence or ask you to complete tax forms. The tick box format on the form makes it easy to tell HMRC that the company isn’t active, when you think it will start, or that you don’t yet know.

Keep these notes and the form CT41G to use when the company becomes active.

See our Q&A article for more information on the requirements when creating a dormant company.

What HMRC will do next

HMRC will write to you with your corporation tax key dates (form CT610). Those dates include your first accounting period end date, which it will use to work out the company’s payment and filing dates. If you send back the form CT41G New Company Details, HMRC will work out your first accounting period end date from the information you give it. Otherwise, they will assume that the company became active on the day it was registered at Companies House and that its first accounting period ends 12 months later. A few weeks after the accounting period ends HMRC will send you form CT603 to deliver a company tax return and reminders nearer the relevant dates about paying your tax and filing your return.

Paying corporation tax

Companies are liable to corporation tax on their profits and have to calculate their own tax (under the self-assessment regime). Most companies have to pay their corporation tax nine months and one day after the end of their accounting period. HMRC will send you a reminder and payslip shortly before that date which gives details of how to pay any corporation tax due.

Filing your company tax return

Soon after the end of each accounting period HMRC send you a form CT603 (notice to deliver a company tax return). The notice requires you to send HMRC a company tax return that includes:

  • A completed company tax return form (CT600) and any relevant supplementary pages (forms CT600A to J).
  • A copy of the company’s accounts for the period covered by the return.
  • Computations showing how entries on the return form have been calculated from figures in the accounts.

Companies normally have to file their company tax return within 12 months of the end of their accounting period.

If HMRC send the company a notice and it doesn’t deliver the company tax return by the filing date in the right format, HMRC charge penalties even if there is no tax to pay. The penalties start at £100 and can rise to £1,000 plus 20 per cent of any tax paid late for prolonged delays and repeated failures. There are also penalties for not telling HMRC which can be as much as 100 per cent of any tax that remains unpaid 12 months after the end of the accounting period.

Companies House requirements

Annual Return

This is a snapshot of general information about a company’s directors, secretary (where one has been appointed), registered office address, shareholders and share capital.

Every company must deliver an annual return to Companies House at least once every 12 months. The company’s director(s) and the secretary (where applicable), are responsible for ensuring that they deliver the annual return to Companies House within 28 days after the anniversary of incorporation of a company or of the anniversary of the made-up date of the last annual return. If you do not deliver the company’s annual return, the registrar might assume that the company is no longer carrying on business or in operation and take steps to strike it from the register.

Filing Accounts

All private limited and public companies must file their accounts at Companies House. These requirements are not the same as HMRC’s and this may mean that you will need to prepare separate accounts for each. There are also different filing deadlines and penalties for late filing. A financial year is usually a 12-month period for which you prepare accounts. Every company must prepare accounts that report on the performance and activities of the company during the financial year. This starts on the day after the previous financial year ended or, in the case of a new company, on the day of incorporation.

You may not feel able to undertake the additional paperwork. In which case you should appoint a chartered accountant as your agent to deal with HMRC and to assist with the filing requirement of Companies House. You can find a chartered accountant at the Institute of Chartered Accountants in England and Wales.

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