When should I set up a limited company?

Should I set up my business as a limited company?

The formation of a limited liability corporation offers various advantages over other business structures, including favorable tax treatment and decreased exposure to risk. This post will provide you with a deeper comprehension of limited corporations as well as the obligations that come along with establishing one.


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What is a limited company?

You can choose to conduct your firm using a structure known as a limited (or limited liability) company. This type of company is accountable in its own right for all that it does, and its financial matters are kept separate from your personal financial matters.

Due to the fact that it is a distinct legal entity, it is able to sign contracts under its own name. Rather than on behalf of the firm’s owners, business decisions are made on behalf of the company. The owners are shielded from legal responsibility thanks to limited liability. This indicates that they are only liable for the obligations of the company up to the value of the money that they invested in the company.

Once it has paid the necessary taxes, the corporation is entitled to keep all of the profits it generates. The earnings of the corporation, after taxes, are available to be distributed among the shareholders in the form of dividends.

The company is required to have at least one director who will be in charge of managing the company’s operations, as well as a company secretary who will be in charge of ensuring that all of the regulations are adhered to and official documents are kept.


Can I begin trading before I have set up a limited company?

Once you have received confirmation from Companies House that your application has been accepted, you are free to begin conducting business through your newly formed company. The registration process for a limited company that is formed through 1st Formations typically takes between three and six hours of actual labor time (subject to Companies House workload).


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Do I need an accountant for limited company?

There is no legal obligation for limited firms to engage an accountant; yet, there are several benefits to doing so. Some of these benefits include having someone complete your yearly accounts and your company’s tax return. They are also able to handle the process of registering new businesses for tax purposes.


Can one person own a limited company?

It is possible for a single person to start a limited company and serve as both the business’s only shareholder and director, or a limited company might have several shareholders. Creating a limited liability corporation has several benefits, including the following: The firm is solely responsible for any liabilities that may arise, such as debts or legal action.


How long does it take to set up a limited company?

How much time is needed to get a limited corporation up and running? The online registration process with Companies House is quick and doesn’t take any time at all. You may complete the process in a matter of minutes if you have everything prepared, and you will often be registered within twenty-four hours after starting it.


Gm professional accountants have offices located in London Canary wharf, London Wimbledon ,Ilford Essex and Birmingham.

How to Tell HMRC No Corporation Tax is Due for my Company

No Corporation Tax payment due

Regardless of whether it states that there is no corporation tax owed and as long as your business is still active, you still need to file a company tax return. Therefore, you must inform HMRC as soon as possible if you do not owe corporation tax for a specified accounting period. Failure to inform HRMC promptly will mean that they will send you a payment reminder.

If your company has no tax owed, fill out the following online form to notify HMRC that there is no corporation tax payment due:

Online notification of no payment due

It is advised to refresh your browser between submissions when reporting nil payments, especially if you are using multiple Corporation Tax reference numbers. As a result, the correct reference number will be employed.

Fill out the box below with your Corporation Tax payment reference number.

TIP: You can view the payment reference number in either of the following:

  • On your notice to file
  • On any reminders that HMRC sent you, or
  • By accessing your company’s HMRC online account
  • Select “View account” followed by “Accounting period”

To ensure that it is correct, keep in mind that the reference is 17 characters long and is specific to an accounting period.


How do I file a zero corporate tax return?

A professional accountant is familiar with the necessary information and can properly prepare all documents pertaining to your corporate tax return. By employing an accountant to complete the nil corporate tax return for you, you will be able to file it easily and securely.


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How do you let HMRC know company is dormant?

The date the company became or will become dormant must be specified in writing to your local Corporation Tax Office so that HMRC can verify the information. Following that, the correspondence from HMRC will provide you with their contact information.

Do I need to tell HMRC My company is dormant?

When the business has been idle for too long, especially if it has ceased operations and has no other sources of revenue, you may need to inform HMRC that your company is dormant for Corporation Tax. Informing them will exempt your dormant company from paying corporation tax and filing a company tax return.


How long can a company be dormant?

If you purchase a company to safeguard your enterprise, the company can remain dormant for as long as you like. What other business owners usually do is that they purchase a company and keep it inactive. That way, no one will take an interest in purchasing the company they bought, and they can start its operations later on.


Does a dormant company need to pay Corporation Tax?

The good thing about a dormant company is that it does not need to file a company tax return, and it is not required to pay corporation tax. This is simply because there was no income being generated for a long time to file for a tax return or pay corporation tax.



Gm professional accountants have offices located in London Canary wharf, London Wimbledon ,Ilford Essex and Birmingham.

VAT implications on selling to UK & USA customers and world wide

Providing services abroad.


The majority of services rendered to clients who are located outside of the UK are to be regarded as exempt from UK VAT. In this case, the sale is “VAT free,” so the value of the sale in Box 6 [Box 6] is the only input required on the UK VAT return.A corporate client, especially those in the EU in particular, may need to use the reverse charge to account for VAT in their own country. A UK supplier is no longer obligated to add wording like “customer may have to apply the reverse fee” on their sales invoice. Additionally, beginning January 1, 2021, services provided to VAT-registered consumers residing in other EU countries do not require an EC Sales List (but there is an exception for suppliers based in Northern Ireland). Selling services abroad is quite similar to exporting things, with the exception that in this situation, you are selling your skills rather than stuff.


Purchasing products from a different EU nation


The VAT regulations for imports now apply to purchases made by enterprises located in Great Britain that will be delivered to Great Britain. The provider does not impose any VAT on exports from the EU as long as the necessary requirements are satisfied. To release the products into Great Britain, businesses importing items from the EU must file customs declarations, pay import VAT, or use postponed import VAT accounting. Customs duties can also be due. For Northern Ireland, which is to be viewed as staying in the EU when doing business with EU companies, there are various restrictions. Therefore, the buyer accounts for purchase tax in Box 2 of the return when enterprises import items into Northern Ireland. Additionally, entries will be made in Box 4, Box 7, and Box 9 (the quantity depends on how much you are eligible to claim).


Purchasing products from a non-EU nation


Apart from the fact that the regulations now also apply to commerce with EU nations, there is no change to this procedure as a result of Brexit. Businesses must pay import VAT when products enter the UK, and the VAT can theoretically be recovered if the importer is the legal owner of the items and has the necessary documentation for input VAT recovery. The importer may also decide to use Postponed Import VAT Accounting to apply the UK import VAT that is owed. Keep in mind that when the products are imported, customs duties may also be required.


When you purchase a good from a non-EU nation, you effectively become an importer and are responsible for paying Customs and Excise Duty as well as Value Added Tax (VAT). The items would usually be held by the Customs Authority at the border until the duty and tax are paid, unless the terms of the transaction indicate something different.


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Import VAT accounting was postponed (PIVA).


The importer of record has the option of using PIVA to record import VAT. As a result, the importer is not required to pay import VAT when the products are discharged into the UK; rather, the import VAT is reported on the VAT return as both payable VAT (sales) & receivable VAT (purchases), with the amount of recovery based on the company’s recovery status.


An improved cash flow situation is the effect of this.


This is how entries will be made:


Box 1 (Output tax)


The amount of postponed import VAT is based on the PIVA declaration from HMRC. This firm has delayed the import VAT. Box 4 (Input tax) includes the same amount of postponed import VAT from Box 1 as it does (if all the import VAT is recoverable) Box 7 (Purchases) The net import VAT amount should be shown as the purchase invoice amount plus any importation fees paid into the UK.


If an importer chooses not to use PIVA, they must pay the import VAT at the time the items are imported and are then given a C79 certificate to support the recovery of the VAT. For input VAT entries, fill out Box 4 (the amount depending on how much you are allowed to claim), and for purchase entries, fill out Box 7.


Providing products to an EU company with a VAT number


After Brexit, sales of products from the UK (except Northern Ireland) to an EU VAT registered firm are considered exports (formerly known as dispatches), i.e. zero-rated, provided that the seller can provide proof of the export documentation they have on hand. Box 6 should be used to record the sales amount. Intrastat disclosures and EC Sales Lists are no longer necessary. In accordance with the rules governing intra-EU trade (i.e., dispatches or sales of products between EU countries), Northern Ireland will continue to do business with EU countries. The transaction is zero-rated and should be reported in Boxes 6 & 8. Depending on the number of transactions, both Intrastat statements and EC Sales Lists will be required.


Selling products for export outside of the EU


In certain situations, the transaction is often not taxed at all, and this is noted in Box 6.


Purchasing international services


The reverse charge is applied to the majority of services provided by both EU & non-EU businesses. There are certain exceptions to this rule, such as the cost of entry to events, services tied to the property, and long-term rentals of goods. If you get an international invoice for a service that excludes VAT, you will often need to account for the VAT on a reverse charge basis. The reverse charge’s core tenet is that the client manages the VAT rather than the supplier. The services are seen as both a cost and revenue by the client.


The necessity to use the reverse charge is unchanged as a result of Brexit.


The following entries will be included in the VAT return:


Box 1 (Output tax)


combined with amounts for delayed import VAT and multiplied by the VAT rate for the service in the UK.


Box 4 (Input tax)


The same amount as Box 1, but with any import VAT payments that were delayed and any requirements for partial exemption taken into account.


Box 6 (Sales)


Enter the net amount less the invoice value.


Box 7 (Purchases)


Enter the net amount less the invoice value.



Gm professional accountants have offices located in London Canary wharf, London Wimbledon ,Ilford Essex and Birmingham.

Why Did I Receive a £100 Corporation Tax Fine/Penalty from HMRC ?

Penalties for Late Filing

Company Tax Return, like other taxes also has its deadline for filing. Meaning, if you fail to pay your tax return within the prescribed period, corresponding penalties shall apply, and as time passes by after the deadline, the fine gets higher and higher. That is the reason why it is important for you to be mindful/always keep reminded on these crucial dates to pay or file such taxes.

The HM Revenue and Customs (HMRC) will estimate your Corporation Tax Bill and will be responsible in adding penalty for unpaid taxes as much as £100 up to 10% of the unpaid tax for 12 months. To fully understand, hereunder is the breakdown of the penalties you will pay if you fail to meet the deadline:

  • 1 day after the deadline- £100
  • 3 months after the deadline- another £100
  • 6 months after the deadline- HMRC will add penalty of 10% from the unpaid Corporation Tax Bill. The HMRC will send you a letter requiring you to pay the unpaid tax. It is called by the term “tax determination. If your company already received this notice/letter, you cannot appeal against it unless otherwise, there is a reasonable justification for the late filing.
  • 12 months after the deadline- another 10% of any unpaid tax

Remember: The later you file after the deadline, the bigger penalties are charged. If you don’t pay your tax return on time three times in a row, penalties will increase up to £500 each. It is therefore important to pay your Corporation Tax due and file your tax return because the later the payment, the higher the penalties will be charged against you.


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As mentioned above, a company can still file its appeal against the penalty for late filing unless otherwise a justifiable reason is presented. All you need to do is to call the Corporation Tax helpline, or better yet, write to your company’s Corporation Tax Office.

However, the HMRC does not accept all types of justifications as there are only certain excuses that their office considers why you were not able to pay your obligation. Some justifiable reasons that the HMRC will accept are those life-threatening illnesses or situations (disasters, fire, etc.), death of a close family member before the deadline, postal delays, system/software failure of HMRC and others. Since the whole world is affected with the COVID-19, HRMC also considers this reason as long as you can explain clearly how this pandemic affected the filing.

For more inquiries, the HMRC helpline is open from 8 AM to 6 PM from Mondays to Friday and their customer care personnel are more than willing to provide assistance.

How do I get out of HMRC fines?

Filing your appeal to HMRC is the only way to save yourself from paying penalties due to late filing of taxes, however, this is not always 100% guaranteed since the HMRC has their own standards and requirements in order for them to grant the appeal of a certain company. In filing your appeal, you have to make sure that you provide the necessary information, such as the date the penalty is issued, the date you filed your Self-Assessment Tax Return and the exact details of your reasons for late filing.


Are HMRC penalties criminal?

Tax evasion can be penalized as financial, criminal or both depending on the severity of the and based on the civil procedures of the HMRC. Prior to the issuance of penalties, the HMRC will conduct thorough investigation in order to determine whether there is an absolute ground to order penalties for unpaid taxes. But as long as the underpaid tax is settled, there is unlikely to be a penalty for tax evasion.

How long do I have to pay HMRC penalty?

You will be given 30 days to pay the HMRC penalty from the date of the PAYE late penalty notice to pay. You can pay the penalties in different paying channels, except at the Post Office. If the deadline falls on Holidays and Weekends, make sure to pay the penalty on the last working days before these dates.

What happens if you ignore HMRC?

HMRC is considerate as long as you provide justifiable reasons for filing your tax return late, however, if you ignore their notices and won’t respond, you will face a penalty and worse, it could lead to the forced closure of your company. That is why it is very important to settle unpaid taxes and be mindful in the deadline of filing.


Can HMRC look at my bank account?

Yes. HMRC is authorized to issue a “third party notice” during an investigation for tax evasion. Said notice will be sent to banks, financial institutions and even to the taxpayer’s lawyers and accountant in order to request information about the financial status of a company.


Gm professional accountants have offices located in London Canary wharf, London Wimbledon ,Ilford Essex and Birmingham.