Category: Corporate Governance & Regulation

A new one-stop service to register a company and register for tax at the same time has been used by more than 200,000 businesses since it was introduced. The introduction of the Streamlined Company Registration Service was announced as part of the Small Business, Enterprise and Employment Act 2015 to help reduce administrative burdens and came into effect last year. However, there remain many new companies who have not used this service.

A business cannot operate as a limited company until it has been incorporated at Companies House under the Companies Act 2006. There are three ways to incorporate a company, by electronic software filing, web incorporation service and paper filing. The cheapest and most popular methods of doing so are electronic.

Under the new online service, businesses registering with Companies House, can also register for tax and HMRC’s digital services, making it easier for new start-ups to fulfil all their legal obligations in one go. This service removes the need for businesses to send duplicate information to both Companies House and HMRC when registering for Corporation Tax, and also to register an employer for Pay As You Earn (PAYE) tax.

Mel Stride MP, Financial Secretary to the Treasury, said:

‘HMRC and Companies House are working hard to make business registration and tax easier. Previously, the same information would need to be entered into a number of different platforms to register a company and register for tax, we have simplified that process.’

As well as filing accounts with Companies House, there is a requirement to check that the information Companies House stores about your company is correct every year. This is facilitated by the filing of an annual company confirmation statement. The confirmation statement was introduced in June 2016 and replaced the more cumbersome annual return.

A confirmation statement must usually be filed once every 12 months and rather than resubmitting data every year, the statement only needs to be updated if there are changes to report. If there are no changes then you just need to confirm the information is correct and submit the statement.

The following details need to be checked:

• the details of your registered office, directors, secretary and the address where you keep your records
• your statement of capital and shareholder information if your company has shares
• your SIC code (the number that identifies what your company does)
• your register of ‘People with Significant Control’ (PSC)

Any necessary updates to the statement of capital, shareholder information and SIC codes can be made when submitting the confirmation statement. However, the confirmation statement cannot be used to report changes to your company’s officers, the registered office address, the address where you keep your records, people with significant control. These changes must be filed separately with Companies House and this should be done at the same time or prior to submitting the confirmation statement. The confirmation statement can be filed online (at a cost of £13) or by post (at a cost of £40).

Companies House will send an email alert or reminder letter to the company’s registered office confirming the due date for the statement. The confirmation statement can be filed for up to 14 days after the end of the review period. There can be fines of up to £5,000 for a late filing. Companies House has the power to prosecute a company and its officers for failing to submit a confirmation statement. A company can also be struck off the register.

Business rates are charged on most non-domestic premises, including most commercial properties such as shops, offices, pubs, warehouses and factories. Some properties are eligible for discounts from the local council on their business rates. This is called business rates relief. There are a number of reliefs available, including small business rate relief, rural rate relief and charitable rate relief.

In England, small businesses rate relief is available on properties with a rateable value up to £15,000. Small businesses that occupy property with a rateable value of £12,000 or less pay no business rates. There is a tapered rate of relief on properties with a rateable value up to £15,000. Relief is usually only available to businesses with one property but can be extended under certain limited circumstances.

In Scotland, the relief is known as the Small Business Bonus Scheme (SBBS).  Business rates relief through the SBBS scheme is available if the combined rateable value of all business premises is £35,000 or less and, the rateable value of individual premises is £18,000 or less.

The Welsh small business rates relief scheme came into force on 01 April 2018. 100% rate relief is available to eligible businesses premises with a rateable value of up to £6,000 and a tapered relief is available on properties with a rateable value between £6,001 and £12,000.

In Northern Ireland, the Small Business Rate Relief (SBRR) scheme is available. Eligibility for the SBRR is based on the Net Annual Value (NAV) of business premises. There are three levels of SBRR where the reductions in rate relief range from 50% to 20%. No relief is available for properties with a NAV of more than £15,000.

The Money Laundering Regulations (MLR) are designed to protect the UK financial system and put in place certain controls to prevent businesses being used for money laundering by criminals and terrorists.

Many businesses are monitored by the Financial Conduct Authority (FCA) or certain professional bodies. However, businesses that HMRC is responsible for supervising should be aware of the requirement to register with HMRC and the penalties for not doing so.

HMRC is responsible for supervising the following seven business sectors:

• Money Service Businesses (MSBs)
• Trust or Company Service Providers (TCSPs)
• High Value Dealers (HVDs)
• Accountancy Service Providers (ASPs)
• Estate Agency Businesses (EABs)
• Bill payment service providers not supervised by the FCA
• Telecommunications, digital and IT payment service providers not supervised by the FCA

Businesses need to register with HMRC if they carry out activities typically associated with these types of organisations by way of business and are not already registered. A business (listed above) is not allowed to trade without registering with HMRC under the MLR. Trading while not registered is a criminal offence and can result in a penalty or prosecution. Certain businesses supervised by HMRC also need to be registered or authorised with the FCA.

An application to register with HMRC under the MLR can be made online. A non-refundable processing fee of £100 is payable for businesses registering for anti-money laundering supervision for the first time. There is also a premises registration fee for new businesses amounting to £130 for each property. The application will not be reviewed until the fees have been paid. HMRC will then review the application which can take up to 45 days. Additional documentation is also required for certain business types.

The Charity Commission has warned charities that the deadline for submitting the 2017 annual return is fast approaching. The deadline for charities with a standard 12-month accounting period is 31 October 2018. According to the Charity Commission, there are many charities that have yet to file their annual return. Not filing on time means that the charity will be in default, and this information may be displayed to the public on the charity register.

The annual return is separate from the charity’s annual accounts and the charity tax return sent to HMRC.

The 2018 annual return will see the addition of new questions which are added to ensure greater transparency.

They will include:

• Charities being asked to provide more information about salaries to increase accountability and in response to public concern about high levels of pay.
• Charities will need to provide a breakdown of salaries across income bands, and the amount of total employee benefits for the highest paid member of staff.

In response to a number of concerns raised, the Charity Commission will not publish details of benefits given to the highest paid member of staff on the public register.

There will also be two new sets of questions regarding charitable expenditure overseas. This will establish how charities transfer and monitor funds sent overseas and about income sources from outside the UK.

The completion of these question sets will be optional for the 2018 annual return to give charities time to gather and record the necessary information. The two question sets will become mandatory for the 2019 annual return and thereafter.

There are a number of reasons why a limited company may be no longer required and can be shut down. This may be because the limited company structure:

• no longer suits the needs of its owners,
• the business is no longer active, or
• the company is insolvent.

The agreement of all the company’s directors and shareholders to close down the company will be required.

The method for winding up or liquidating a limited company depends on whether it is solvent or insolvent. If the company is solvent, you can apply to get the company struck off the Register of Companies or start a members’ voluntary liquidation. The former method is usually the cheapest. You should also make sure that no business assets are left as any funds left in business bank accounts could revert to the Crown.

Where a company is insolvent, the creditors’ voluntary liquidation should be used. There are also special rules where the company has no director, for example if the sole director has passed away. A compulsory liquidation will be put in place where a company cannot pay its debts and an application is made to the courts to liquidate.

The register of People with Significant Control (PSC register) came into effect on 6 April 2016. The PSC register is used to identify and record the people who exert significant control over UK companies, often known as beneficial owners.

A PSC is anyone in a company or LLP who meets one or more of the conditions listed in the legislation. This is someone who:

• Owns, directly or indirectly more than 25% of the company’s shares;
• Holds, directly or indirectly more than 25% of the company’s voting rights;
• Holds the right, directly or indirectly to appoint or remove the majority of directors;
• Has the right to, or actually exercises significant influence or control over the company;
• Holds the right to exercise or actually exercises significant influence or control over a trust or company that meets one of the first 4 conditions.

Companies House must be notified (using forms PSC01 to PSC09) whenever there is a change to the PSC register. Companies and LLPs have 14 days to update their PSC register and another 14 days to send the information to Companies House. There is also a requirement to confirm to Companies House, that information on the public register is accurate, where it has not been updated in the previous 12 months.

Companies need to make their PSC register available for inspection on request at the company’s registered office or be able to provide copies. The requirement to hold other information such as a register of members and a register of directors has not changed.

Companies House has been contacting individuals and companies who have not yet complied with the new PSC regulations to remind them of their obligations. There can be significant penalties for companies and officers that fail to take reasonable steps to identify PSCs. Failure to comply with the PSC regime means you could be committing a criminal offence and you could be fined or imprisoned.

There are a limited range of circumstances when a company can request to be removed from the register (known as being struck off). For example, a voluntary strike off can be requested by a dormant or non-trading company.

A limited company can be closed down by getting it ‘struck off’ the Companies Register, but only if it:

• hasn’t traded or sold off any stock in the last 3 months. For example, a company in business to sell apples could not continue selling apples during that 3 month period but it could sell the truck once used to deliver the apples or the warehouse where they were stored,
• hasn’t changed names in the last 3 months’
• isn’t threatened with liquidation,
• has no agreements with creditors, e.g. a Company Voluntary Arrangement (CVA).

If the company does not meet these conditions, then the company will need to be liquidated (also known as a ‘winding up’).

Before applying for a strike off, the company must be legally closed down. This involves:

• announcing plans to interested parties and HMRC
• making sure employees are treated according to the rules
• dealing with business assets and accounts.

There are a number of way you can check if a company is in liquidation. This can include looking on the Companies House register. Companies House is responsible for maintaining a register of company information such as annual returns and annual accounts. This information also includes insolvency details, although this can take some time to be updated and made available to the public.

When a company enters administration, liquidation or receivership, the appointed insolvency practitioner is required to post announcements in the London Gazette. The Gazette also has a search facility.

There are three main types of liquidation:

• Members’ voluntary liquidation (MVL) – which means the directors have made a statutory declaration of solvency
• Creditors’ voluntary liquidation (CVL) – which means that the directors have not made such a declaration
• Compulsory liquidation – this happens when a company is ordered by a court to be wound up.

The Companies House register can be used to find a company that is being wound up (liquidated) or if a company is in ‘provisional liquidation’. This means a court has frozen the assets of a company in advance of a hearing to decide if it should be liquidated.

The final step in bringing a company to a legal end is when the company is dissolved. However, one if the important points to be aware of when doing so is that the dissolved company can no longer trade or otherwise deal with it’s assets. For example, receive a tax refund. It is the responsibility of the company directors to ensure that all of a company’s assets and liabilities are all dealt with before it is dissolved.

Any assets or rights (but not liabilities) remaining in the company at the date of dissolution will pass to the Crown as ownerless property. This happens under what is known as ‘bona vacantia’ which literally means vacant goods. The bodies that deal with bona vacantia claims vary across the United Kingdom, but they all ultimately represent the Crown.

It is possible under certain limited circumstances that an asset can be disclaimed which means that the Crown gives up its interest in the asset. This will usually only happen in the case of what is known as onerous or valueless property.

Only formally dissolved companies are caught by bona vacantia. A company ‘in liquidation’ or ‘being wound up’ is on its way to being dissolved, but is still in existence. Until the company is dissolved its property and rights will not be bona vacantia.

Planning note

It may also be possible for a company to apply to be restored to the register if it was dissolved less than six years ago. This would mean that the bona vacantia ceases to exist. However, this process is by no means straightforward. Any assets or rights owned by the company should be properly dealt with before the company is dissolved.

New laws have come into effect (from 26 April 2018) to help tackle the problem of identity fraud and personal harm for company directors. The new laws, which were introduced into parliament on 22 February 2018, allow company directors and others such as secretaries, people with significant control (PSC) and LLP members, to remove their personal addresses from the UK’s official company register on Companies House.

Prior to the introduction of this law it was only possible for a director to ask for their personal address to be hidden from personal view if they could demonstrate that they were at a serious personal risk of violence or intimidation.

Under the new law this protection is much easier to obtain. Company directors and others will still be required to provide an alternative correspondence address if they are appointed to a live company. If they are no longer appointed to a company, then an alternative address is not required and only the first half of their postcode will be made available to the public.

Planning note

There is a charge of £55 per document where a director wants to suppress their home address. The option is not available if the home address is the same as the company’s registered office address. This change has been prompted by research that showed company directors were twice as likely to be the victims of identity fraud as other members of the public partly due to the fact that their home address was publicly available.

Please call if you would like to ring-fence your persoanl address using this scheme.

We recently discussed updated Companies House guidance that provides advice on checking which names are acceptable to Companies House when naming a company. HMRC also published guidance for choosing a company name when setting up a private limited company. There are different rules for sole traders and business partnerships.

HMRC suggests that some of the important points to consider when deciding on a company name include:

1. The name of the company must end with ‘Limited’ or ‘Ltd’ or the Welsh equivalents ‘Cyfyngedig’ and ‘Cyf’ if registered in Wales.
2. The name of the company can’t be the same or too similar as another registered company’s name.
3. ‘Same as’ names include, those where the only difference to an existing name is certain punctuation, certain special characters, a word or character that’s similar in appearance or meaning to another from the existing name or a word, or character used commonly in UK company names.
4. ‘Too like’ names where someone complains, and Companies House agrees it’s ‘too like’ a name registered before yours.
5. You can trade using a different name to your registered name. This is known as a ‘business name’ and there are certain rules that must be followed
6. There are also limits for some sensitive words or expressions. For example, a word or expression that may cause criminal offence or that suggest a connection with government or local authorities (without permission). This includes names that could be taken to cause criminal offence.

A new email alerts service has been launched by Companies House. The new alert service covers a range of subscription topics and should not be confused with the email reminder service, which advises when accounts and confirmation statement are due for filing.

If you are interested in receiving email reminders about your accounts and confirmation statement, you need to sign up using the Companies House online filing service.

The new email alerts service can be used by new or existing businesses and the alerts will include information on the benefits of running a limited company, and how to incorporate as well as important updates about the Companies House Service.

Companies House is using Granicus (a digital platform used by public sector organisations) to send emails to subscribers.

You can subscribe for alerts on a variety of topics, including:

• Companies House blogs
• Webinars and podcasts
• Legislative news and updates
• Twitter

The Government has announced that the business rates anomaly known as the ‘staircase tax’ is to be axed. The ‘staircase tax’ affects businesses that operate in adjoining units or rooms, but are accessed from a communal lift, corridor or staircase. For example, a business that has offices on two floors of a building that are accessed via a communal staircase. Such businesses are unfairly treated as they presently pay rates as if occupying two totally separate properties.

The ‘staircase tax’ was not introduced by the Government but arose following a Supreme Court ruling in 2015 which brought about a change to the practice of the Valuation Office Agency (VOA) in assessing rateable values for businesses. This ruling overturned an established and widely understood practice where businesses occupying two adjoining floors or two rooms separated by a wall only received a single bill. This ruling appears to have disproportionately affected small businesses.

Communities Secretary Sajid Javid said:

‘The ‘staircase tax’ is an unfair rates hike for businesses. For years these businesses in adjoining units or rooms received one rates bill, but this ruling meant they now faced multiple bills for operating in an office linked by a communal lift or stairs.

I am ending this by giving those businesses affected the option of getting their rates bills recalculated and any savings due backdated.’

Planning note

Once the necessary legislation is in place, businesses will be able to choose to have their rates recalculated under the old single bill system and claim backdated refunds. Businesses will also be able to continue to benefit from any small business rate relief they had lost by virtue of the ‘staircase tax’ rules.