Process to form a limited company.

[jonathan2141]

Hi, bit of a basic question I know, but what is the actual order you have to do things to set up a ltd company? I'm a sole trader looking at setting up a ltd company, pretty much purely for tax advantages. I want to do as much as I can without using an accountant.

Do you first complete the INO1 and register with company's house? Then do you automatically receive a 'Company Unique Tax Reference (UTR)' ?

As the only person in the business, am I both employer and employee, and would I need to register for PAYE? if so where would I get the 'Employers PAYE Reference'?

Many thanks
Jon

 

[liongroup]

I would suggest using Ryan or another qualified accountant. You will need one anyway going forward to file your accounts and taxes.

 

[Grayson Moore]

Jonathan,

Once you have formed the companym either with Companies House directly or via an agent, HMRC should issue a form CT41G for you to complete which will state the company tax reference. The form will ask a series of questions such as when you intend to start trading, what the year end will be, who the directors are etc.

To register as an employer have a look at the HMRC website (hmrc gov uk/paye/intro/register/htm). It should answer any of your questions.

I'd link it properly but not enough posts!

 

[Talay]

OK, this does not have to be complicated at all.

The best online formation I have found and which I use frequently is http://www.companiesmadesimple.com/company-formation-name-search.html

I tend to use their Silver package as I use their registered office for some of my companies.

The top attraction though is that it takes only a few minutes, is all done online and crucially, you get the online filing code for Companies House straight away. Their web portal is also the best in the business I've found.

For a simple, new company you do not need an accountant. You also don't need an accountant to file your annual return or work out your taxes or anything else. Many people do use an accountant, but there is no legal requirement to do so and for small non complicated businesses it is an unnecessary waste of money.

However, if you have no knowledge of the tax system then you probably need some hand holding but don't let any accountant rip you off for what is a 5 minute job and a cost of £16.99. Ask them about total first and subsequent year costs.

But do remember that if not paying a professional means that you need to spend umpteen hours on it yourself, then your business will suffer. My advice would be to be honest with yourself about your abilities and spend a little time getting some sound advice and a little hand holding.

 

[jonathan2141]

Thanks for the reply guys, and on a Saturday as well.

I worked out that with this calculator:
www dot uktaxcalculators dot co dot uk slash dividend-vs-salary dot php

With say a £25k profit there would be a £1500 saving in tax by setting up a LTD company, so as long as the additional costs, bank fees, accountant fees etc, don't cancel this out, it's probably a good idea?

Also another question, when after setting up the company and becoming an employee and cancelling my sole trader status, I sell a camera I bought as a sole trader (which I offset against my earnings) Do I have to tell HMRC or just pocket the money? Is it capital gains etc?

Cheers
Jon

 

[Talay]

When I first started my own companies, back in the 1990s, it was all paperwork and sometimes I was late. Now it is all online and you get automatic fines. The easiest way to avoid this is to get on top of everything. You need the codes for web filing which the formation agent I mentioned above automatically generates.

You need to get on the ball for HMRC as filing online needs some code which they send out snail mail and it takes about 2 weeks to receive. No good if your filing date is tomorrow !

Co House can set you up with email reminders though which I find useful.

You need to look at VAT if you are anywhere near the current limit. If you are, perhaps acquaint yourself with the flat rate scheme as well and plot the figures in Excel. If you won't need to be registered, you can still register and de-register to claim back VAT on a large purchase.

I have permanent free banking with Santander and Nat West is £3.75 or so after 2 years free on their automatic (?) tarrif. Don't know about others. It can take some time to get accounts up and running though so get onto that ASAP. Always have at least 2 accounts, just in case something goes wrong at one of them.

As for all the mish mash of start up like this camera thing, I personally would not worry but if you are going to use someone, then ask them in your initial free consultation.

If I were going to an accountant, I would want them to complete everything they had to online, leaving me with nothing to do except focus on my business. Beware expensive stuff like payroll which you can do for free and remember you can negotiate.

I haven't used them but some online accountants seem to offer cheap fees however I do wonder what you actually get. If you can keep your figures clear in Excel and up to date (do it weekly) then you should be fine and keep your accountant bills down to the bare minimum.

 

[GraemeL]

T
With say a £25k profit there would be a £1500 saving in tax by setting up a LTD company, so as long as the additional costs, bank fees, accountant fees etc, don't cancel this out, it's probably a good idea?

Its more complicated than this, because it depends on how you handle salary versus dividend versus pension contributions. You could also employ your partner id you wish and pay them about £9k tax free. To answer your question, you need an accountant - which you will need anyway for a Ltd company. Cost probably in the order of £600 to £1,200 a year depending on what you want them to do.

G

 

[Moneyman]

dont do it yourself unless you are a form filling masochist.just get a registration company to do it and dont go for the simple cheapest option. companiesmadesimple etc have ones where they make sure all the books are done and can get the vat application right and have a registered office. For a hundred quid all the worry goes away for a couple of years. If you want to spend 20 hours on all this go ahead and do it yourself but that is below minimum wage and couldnt you earn more with your time?

 

[10032012]

UK Plc does formations for 99p if you take out a business bank account with Barclays.

Others cost usual amounts (around £30-ish to begin with) but you get cash back making it "free" or what not.

Crunch does formations for around £5... they do hassle you for their accountancy business though, although you don't have to take their services if you do not wish to. You are then free to choose your bank etc.

 

[Talay]

Its more complicated than this, because it depends on how you handle salary versus dividend versus pension contributions. You could also employ your partner id you wish and pay them about £9k tax free. To answer your question, you need an accountant - which you will need anyway for a Ltd company. Cost probably in the order of £600 to £1,200 a year depending on what you want them to do.

G

Sorry but having a company does not mean you need an accountant. It is choice, not legislation. On simple small companies, where the owner is able, an accountant is just a waste of money.

 

[Talay]

dont do it yourself unless you are a form filling masochist.just get a registration company to do it and dont go for the simple cheapest option. companiesmadesimple etc have ones where they make sure all the books are done and can get the vat application right and have a registered office. For a hundred quid all the worry goes away for a couple of years. If you want to spend 20 hours on all this go ahead and do it yourself but that is below minimum wage and couldnt you earn more with your time?

You have to balance this with any use of an accountant. No point in paying twice for the same service.

 

[Business Friend UK]

Sorry but having a company does not mean you need an accountant. It is choice, not legislation. On simple small companies, where the owner is able, an accountant is just a waste of money.

You will need a specific type of file to submit your accounts to HMRC... Unless you have accounting software good luck here....

 

[Scalloway]

If you look on the Accounts and Finance part of this forum you will find regular queries from people who have tried to submit their own company accounts and arre struggling to complete the free HMRC filing software. You have to balance the time it will take to prepare the submission yourself against the income you could earn in that same period to make it worthwhile.