Limited companies

This area contains important information for limited company directors and shareholders, including advice on buying a ''ready-made'' company, essential legal issues, tax saving and planning strategies and ideas on how to maximise the benefit of our services.

The legal and taxation regime for limited companies continues to change. The main rate of corporation tax commencing 1 April 2013 is 23 per cent, while the small profits rate remains at 20 per cent. From 1 April 2014 the main rate reduces to 21 per cent and will be 20 per cent with effect from 1 April 2015.

The Companies Act 2006, complete with almost 1,300 sections is the primary legislation governing limited companies. Visit our Companies Act 2006 section for details of the changes.

Do you have a capital gain? Check our capital gains tax calculator.

The tax system for companies

How the tax system works for companies.

Associated company tax rules

If two or more companies are controlled by the same person or by 'connected persons' (such as husband and wife, or father and daughter), the amounts above are divided by the total number of companies.

Tax and the company car

Details of how the tax system works with company cars.

Company bonus or dividend?

In many small companies, the owners are also the directors, and this gives considerable scope for deciding how profits should be extracted from the company.

Entrepreneurs' relief

The relief is intended to produce a net tax rate of 10% on the disposal, although for those making modest gains there is a slight increase in the actual tax burden compared to that payable under business asset taper relief because the CGT annual exemption saves less tax under this relief (at 18%) than it did under taper relief (at 40%).

Tax saving strategies

Expenditure incurred before the company year end might reduce the current year's tax liability instead of next year's. Bringing forward expenditure by even a few weeks on, for example, building repairs, advertising, sales and marketing campaigns, and any other item deductible from profits can accelerate the tax relief by twelve months.

Claiming expenses - it's all or nothing

The rules which determine what expenses can be deducted from profit for tax purposes are essentially the same whether you operate as a limited company, sole trader or partnership.

Benefits in kind and expenses payments

Benefits in kind are assessed on all directors and employees whose salary and benefits combined are £8,500 or more. Remuneration by way of benefits is often attractive to employees, especially if they are paying the higher rate of income tax, because the benefit may either be tax free or subject to less tax.

Corporation tax

Details of corporation tax rates and bands.

Penalties for late returns

The tax system has many fines and penalties for those that do not file or pay on time. Make sure you do not become liable to any of these penalties.

Main capital allowances

A summary of the main allowances available.

Industrial buildings allowance

Capital allowances for the construction costs of industrial buildings or structures fall under several different headings, but collectively they are known as industrial buildings allowances.

Interest and tax payments

HM Revenue & Customs charge interest on underpayments of tax, and pays interest (repayment supplement) on overpayments. The rate of interest paid on overpaid tax is lower than the rate charged on underpayments, and interest rates are adjusted in line with commercial interest rates.

Business deductions

In order to attract a deduction in computing the profits of a trade or business any expenses must be incurred wholly and exclusively for the purpose of the trade. Capital expenditure is not an allowable expense (capital allowances are claimed on these costs), and certain other expenses are barred by statute.

Companies Act 2006

The Companies Act comprises approximately 1,300 sections and introduces new legislation which reflects the changing business environment.

Companies House - forms you need to know about

There are over 100 forms prescribed by the Companies Act 2006. We list below these and include a link to all the forms which can be downloaded direct from Companies House.

Should you form a limited company?

We are often asked, 'Should I form a limited company?' The reality is that there is no easy answer. Each situation has to be judged individually. Our guide provides an overview of some of the key issues relating to a business trading as a limited company.

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