Company Formation

If you're looking for a UK Company Formation service we recommend using Simple Formations. Straight forward advice and no hidden fees.

Choosing several business bank accounts
 

All of the main UK high street banks offer some form of business banking. The products vary and the interest rates and charges are all different. Whilst keeping all of your banking with one bank is easy is it the best thing for your new business?

Using one bank can help to streamline your finances. On the face of it placing all your business banking requirements with one organisation can make life a lot easier.
You get one set of statements
Only one bank account needs to be reconciled
You may deal with a local bank manager and have a great relationship
Online banking is easy with all your banking in one place

But is this the best way to operate your business?

There are a few simple points to consider-
The interest rates on saving may not be competitive
Not all banks charge service fees for banking
Overdraft, credit card and loan interest charges may be cheaper elsewhere
However a more important issue is whether you should keep all of your eggs in one basket? For a start the government-backed Financial Services Compensation Scheme (FSCS) only protects up to £85,000 of savings. This may seem like a high figure but if your business account reserves increase how safe is your money if its all with one bank?

Have you consider the damage to your business if through a misunderstanding, error or genuine reason a bank chose to deny access to your account. A second account with another bank would allow you to continue to receive and make payments. Do you want one bank making decisions on your company’s overdraft or ability to borrow funds.

There are many reasons to build a good working relationship with a bank but there are also serious implications if you choose not to spread your company finances across two or three different banks.

Budget report March 2010
 

Following the budget yesterday the following points may be of interest to business owners.

Corporation tax rates

The main rate of corporation tax which applies to companies with profits of more than £1.5 million has already been set at 28% for the year commencing 1 April 2010. The same rate is to apply for the year commencing 1 April 2011.

The small companies corporation tax rate which applies to companies with up to £300,000 of profits is currently 21%. An increase to 22% is planned to take effect from 1 April 2011.

The effective marginal corporation tax rate for profits between £300,000 and £1.5 million is 29.75%.

Associated companies for corporation tax rates

The upper and lower limits for corporate tax rates are divided equally between a company and its ‘associated’ companies. A company is associated with another company if one of them has control of the other or if both are under the control of the same company or person(s).

The shares of direct relatives, business partners and some trustees can be attributed to the person for the control test. So even if a husband owns no shares in a company, he may be deemed to own the company via his spouse’s shareholding.

In October 2009 HMRC issued a consultation proposal to amend the circumstances in which rights held by linked persons are attributed between them to establish control. Those circumstances are where there are ‘relevant tax planning arrangements’.

Broadly the proposal suggested that the rules will only apply to those cases involving ‘fragmentation’ of the business activities. This includes circumstances where related business activities have not been aggregated into the business of a single company.

When considering whether there has been any fragmentation, HMRC will have regard to the degree of financial, economic or organisational links which exist, or have existed, or might be expected to exist between the relevant activities/companies involved.

It has been announced in the Budget that the change to the associated company rules will be included in the Finance Bill 2011.

Pre-Budget Report Summary 2009
 

A summary of the key points raised in the Pre Budget Report can be found below-

Chancellor Alistair Darling presented his Pre-Budget Report on Wednesday 9 December 2009.

Mr Darling spoke of the Report taking place at ‘a critical time for our economy’ and that the task was ‘to secure the recovery and promote long-term growth’.

This summary concentrates on the main tax measures which are being introduced:

- a 1% increase in the NIC rates payable by employers, employees and the self-employed from April 2011
- freezing the personal allowances and tax bands at the 2009/10 amounts for most taxpayers
- the introduction of a 50% additional rate of tax for those with the highest income levels
- changes to the complex rules for the Special Annual Allowance charge which affect those with substantial income, making significantly higher pension contributions in anticipation of the removal of higher rate tax relief which will occur in 2011
- the deferral for a further year of the planned increase in the small companies corporation tax rate, maintaining the current rate of 21% for a further year
- the standard rate of VAT will return to its former rate of 17.5% on 1 January 2010
- a temporary bank payroll tax of 50% is to apply to certain bonuses (in whatever form).

VAT to revert back to 17.5%
 

From 1 January 2010 the VAT rate will revert back to 17.5%. The temporary rate of 15% will cease.

When invoicing and receiving payment which date should you use? In simple terms the normal tax point rules will apply: date of invoice or date of payment, whichever comes first. So if the invoice or payment is made before 1 January, VAT will be at the rate of 15% and anything after will be at 17.5%.

Basic rules to charging VAT on new rates
1. Retailers should start accounting for VAT at 17.5% with effect from 1 January, using the VAT fraction 7/47ths. Those who reduced their prices (2.13 % was the calculated reduction) should increase them by the same figure. If the customer has an account and he takes the goods away prior to the change, then you account for VAT at 15%.

2. For all other businesses issuing VAT invoices after 1 January, they should be at 17.5%, unless the goods/services were supplied before the rate change. You can then choose to charge at 15%. For supplies of services that span the change, then you can charge 15% for those services provided before the change, 17.5% afterwards OR charge all at 17.5%

Suppliers issuing invoices prior to the rate change, but where delivery will take place after 1 January, may charge VAT 17.5%

These rules are optional and you do not need to notify HMRC.
3. Businesses issuing quotes and estimates for work to commence after 1 January should quote the 17.5% rate. Customers willing to pay before that date can be charged at 15%, subject to the anti-forestalling legislation.

4. Refunds or credit notes should be dealt with at the same rate originally declared or invoiced i.e. if the adjustment is made after 1 January and it relates to a sale declared at 15%, then the adjustment is at 15%.

5. Invoices issued for 12 months in advance, with monthly payments plus VAT must show VAT at 15% for all monthly payments up to 31 December 2009. All payments after that date must be at 17.5%

6. Sales of tickets to events (theatre, cinema, football season tickets) before 1 January 2010 will attract VAT at 15%, even if the event takes place after the rate change in 2010. The tax point is the receipt of payment.

Remember

The increase in VAT will lead to changes to the Flat Rate Scheme percentages and to the Fuel Scale Charges - all effective from 1 January 2010. Those people, whose VAT returns span the change, will have to carry out two separate calculations.

Additional Paternity Leave and Pay
 

The government has announced its intention to introduce Additional Paternity Leave and Pay for fathers of children due on or after 3 April 2011.

The government will consult shortly on new regulations that will give families greater flexibility in how they choose to look after their children.

Families will have the choice to transfer up to six months leave to the father should they want to, which can be taken by the father once the mother has returned to work.

This new provision will be available during the second six months of the child’s life, giving parents the option of dividing a period of paid leave entitlement between them.

Some of the leave may be paid if taken during the mother’s 39 week maternity pay period. This would be paid at the same rate as Statutory Maternity Pay (generally £123.06 per week).

Parents will be required to ‘self certify’ by providing details of their eligibility to their employer. Employers and HMRC will both be able to carry out further checks of entitlement if necessary.

National Minimum Wage increases
 

Its that time of year again when the minmum wage increases. The latest changes see the adult rate of the National Minimum Wage (NMW) increased to £5.80 (£5.73) an hour from 1 October 2009. This is payable to those age 22 and over.

The hourly development rate increased to £4.83 (£4.77) and for 16 and 17 year olds to £3.57 (£3.53) an hour.

HMRC have the power to charge penalties to those employers found to be in breach of the NMW rules.

Time to consider self assessment
 

If you are managing your own business, running a limited company or a member of partnership then chances are you already complete your own self assessment.

If you prefer to complete your self assessment by paper then you need to file this before 31 October. Now is the time to check that you have all of the required information. If you need the assistance of an accountant then you should act now. Whilst many accountants will file the tax return online some may not.

If you normally file your tax return online then you have a few months yet. The deadline for online tax returns is 31 January as long as you do not request repayment through your tax code.

Company Formation and the Companies Act 2006
 

The latest changes to the way companies are formed will be implemented on 1 October 2009 when the final sections of the Companies Act 2006 come into force. This will have a significant impact on company formation agents, accountants and anyone forming a new limited company.

The latest legislation that governs UK incorporations will be introduced in October 2009. These are the last amendments to be introduced after the Companies Act 2006 received royal assent nearly three years ago.

The main changes of note are
New versions of the memorandum and articles
No Secretary required for limited companies
All companies must appoint at least one natural person
Service addresses can be used by company directors
New forms
No authorised share capital

For more information on this visit the Companies Act 2006 website for a breakdown on how the changes may affect you.

Online documents for your business
 

In business there are many forms and documents that you may need during the course of setting up a company or managing an existing company. The Simple Online Shop are able to provide a wide rang of online documents for UK based companies. There are no postal delays and no waiting for documents. The website provides all documents in electronic format for immediate download and use. They have priced their documents sensibly with prices starting from only £3.95. At that price why would you spend valuable time trying to prepare or source your document from a more traditional high street retailer?

A sample of documents available for companies includes-

share certificate template for limited companies
articles of association for limited companies
memorandum of association for limited companies
memorandum and articles of association for limited companies
agm notice for limited companies
company resolutions for limited companies
change company name for limited companies
change share capital for limited companies
issue a dividend for limited companies
dividend voucher for limited companies
job application template for use by any business

They also provide a selection of personal documents. For more information visit Simple Online Shop.

Four Banks, Three days and Two very different outcomes.
 

Reporting season is upon us as the Directors of banks queue up to annouce first-half results for 2009, some with smiles on their faces and others wishing they hadn’t got out of bed. But could growth elsewhere provide a glimmer of hope?

Barclays and HSBC started the week on a positive note reporting combined profits of almost £6bn, commentators were quick to point out that this will probably lead to big bonueses for staff at the two banks, particularly for the 20,000+ employees at Barclays.

Monday passed and Tuesday dawned, the morning news started to report more results, this time it was for state-owned Northern Rock, a lender which the taxpayer has quite an interest in. The results matched the this summer’s weather; it was bleak. With a six month loss of £724m, the Rock’s plans to return to the private sector are questionable, which is probably why they are yet to annouce a timetable for the big move.

The worst was still to come. HBOS’ bad debt plunged part state-owned Lloyds Banking Group into £4bn of losses, as announced on Wednesday. But the Board are successfully managing the short-term issues and are well positioned to outperform over the medium term, providing value to our customers and shareholders, according to Chief Executive Eric Daniels. Cost-cutting measures include cutting 9,000 jobs and paying no dividend this year, and when cosidered alongside their commitment to lending an additional £14bn by next March it is clear that Lloyds are trying to get ‘their house in order’ and stimulate the economy by lending, so could this just be a short-term glitch while they deal with HBOS?

The Guardian brightened up the headlines though on Wednesday, with a report into research that shows the service sector to be growing and indicating that this may be a sign that we are beginning to come out of the recession. This compliments news on a good preformance from sterling against the dollar and increased activity from carmakers.

Some good news, some bad news and some ugly news certainly makes a better reading than the recent flood of all ugly news – could this finally be a step in the right direction for the UK? In no way do I think that we are out of the recession, or indeed entering the final stages, but we may be on the right track.

It will be interesting to see how much progress is made over the next 6 months as the general election looms and the financial crisis remains high on manifestos, could Labour actually make a big enough difference to escape the inevitable Tory victory?

Read our Business Blog for regular updates about finance, the economy, news of interest and related stories.

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