Limited Company Obligations
A limited company is bound by a few obligations each year, some of which include, an annual set of accounts, a confirmation statement, VAT returns (if VAT registered) and self-assessments for each director.
To understand the obligations of an LTD further, you must first understand how the corporation is structured.
A limited company is a separate legal entity. This means liabilities of the company are not held by its owners. Instead, the owners are separated from the business’s debts and obligations.
This means that if the business was to get into trouble and be unable to pay its debts, these debts would stay within the company and all shareholders’ & directors’ personal assets would be safe.
It is a popular business structure within the UK and is owned by its shareholders; if limited by shares, or its guarantors; if limited by guarantee.
The shareholders and directors of the company are responsible for its day-to-day operations and producing any documents or returns that are required of it on an annual basis.
What are the obligations of a private company?
The obligations of a private limited company are those that directly affect the day-to-day running of the business as well as its owner. These include debt, creditors, tax, employees, and customers.
All companies, whether public or private, have additional legal obligations throughout their financial year:
- Confirmation Statement
- Annual Accounts
- Company Tax Return
- Corporation Tax
- VAT Returns
- Self-Assessment Returns
Confirmation Statement (Annual Return)
Each year, a limited company must file a Confirmation Statement (previously known as an Annual Return) with Companies House.
A Confirmation Statement is a set of documents that provide a summary of your company’s information for the current financial year; excluding any financial summaries.
The Confirmation Statement is used to provide information held at the register of companies. This includes the:
- Name and registered number
- Registered office address
- Directors and secretary
- VAT number (if applicable)
The company must then submit this information within fourteen days of the review period. The review period is calculated at either 12 months after you last submitted a Confirmation Statement or 12 months after the date of incorporation.
A Confirmation Statement can be submitted online for a fee of £13, or by paper filing for a fee of £40.
There are no penalties for filing your Confirmation Statement late. However, if this is a regular occurrence or your statement has been due for a long time, Companies House can start legal proceedings against you, which could result in your company being struck off the register.
Each year, a limited company must file a set of financials detailing the company’s profit, losses, and expenses; these are known as Annual Accounts.
This comprehensive report will be used to prepare a company Tax Return for HMRC which calculates the amount of corporation tax owed by your company.
Typically, a set of accounts includes a balance sheet, profit and loss account, and notes regarding the current year.
If your limited company is classed as a ‘small business’ you will need to submit a set of micro-accounts. These are a shorter version of annual accounts which only consist of a balance sheet and notes.
Even if a company has not yet traded, a set of accounts must still be submitted to governing bodies. These are known as a set of dormant accounts and will specifically inform regulators that your company is not yet trading.
Once a limited company has produced their financial summary for the year, a copy of the report must be given out to all members of the company, such as shareholders and directors.
Company Tax Return
- Doing business
- Making investments
- Selling assets for more than they cost
- careless – a lack of reasonable care
- deliberate – such as intentionally sending incorrect information
- deliberate and concealed – such as intentionally sending incorrect information and taking steps to hide the error