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Limited Company Accounting and Record Keeping

November 9, 2019 by Ejaz Ul Haq

ERAA Consulting Limited are leading Xero Accountants and Book Keepers in Glasgow. We help you to remain fully compliant with rules and regulations. We are expert Xero Accountants and Book keepers in Glasgow. By visiting our website, you are at the right place to hire Xero Accountants and Book Keepers in Glasgow. ERAA Consulting Limited as Xero Accountants and Book Keepers in Glasgow will help you run your business at the optimum level.

As a director of a limited company, you must:

  • follow the company’s rules, shown in its articles of association
  • keep company records and report changes
  • file your accounts and your Company Tax Return
  • tell other shareholders if you might personally benefit from a transaction the company makes
  • pay Corporation Tax

You can engage other people to manage some of these things day-to-day (for example, an accountant) but you’re still legally responsible for your company’s records, accounts and performance.

Taking money out of a limited company

How you take money out of the company depends on what it’s for and how much you take out.

Salary, expenses and benefits

If you want the company to pay you or anyone else a salary, expenses or benefits, you must register the company as an employer.

The company must take Income Tax and National Insurance contributions from your salary payments and pay these to HM Revenue and Customs (HMRC), along with employers’ National Insurance contributions.

If you or one of your employees make personal use of something that belongs to the business, you must report it as a benefit and pay any tax due.

Dividends

A dividend is a payment a company can make to shareholders if it has made a profit.

You cannot count dividends as business costs when you work out your Corporation Tax.

Your company must not pay out more in dividends than its available profits from current and previous financial years.

You must usually pay dividends to all shareholders.

To pay a dividend, you must:

  • hold a directors’ meeting to ‘declare’ the dividend
  • keep minutes of the meeting, even if you’re the only director

Dividend paperwork

For each dividend payment the company makes, you must write up a dividend voucher showing the:

  • date
  • company name
  • names of the shareholders being paid a dividend
  • amount of the dividend

You must give a copy of the voucher to recipients of the dividend and keep a copy for your company’s records.

Tax on dividends

Your company does not need to pay tax on dividend payments. But shareholders may have to pay Income Tax if they’re over £2,000.

Directors’ loans

If you take more money out of a company than you’ve put in – and it’s not salary or dividend – it’s called a ‘directors’ loan’.

If your company makes directors’ loans, you must keep records of them. There are also some detailed tax rules about how directors’ loans are handled.

Company and accounting records

You must keep:

  • records about the company itself
  • financial and accounting records

You can hire a professional (for example, an accountant) to help with your tax.

HM Revenue and Customs (HMRC) may check your records to make sure you’re paying the right amount of tax.

Records about the company

You must keep details of:

  • directors, shareholders and company secretaries
  • the results of any shareholder votes and resolutions
  • promises for the company to repay loans at a specific date in the future (‘debentures’) and who they must be paid back to
  • promises the company makes for payments if something goes wrong and it’s the company’s fault (‘indemnities’)
  • transactions when someone buys shares in the company
  • loans or mortgages secured against the company’s assets

You must tell Companies House if you keep the records somewhere other than the company’s registered office address.

Register of ‘people with significant control’

You must also keep a register of ‘people with significant control’ (PSC). Your PSC register must include details of anyone who:

  • has more than 25% shares or voting rights in your company
  • can appoint or remove a majority of directors
  • can influence or control your company or trust

You still need to keep a record if there are no people with significant control.

Read more guidance on keeping a PSC register if your company’s ownership and control is not simple.

Accounting records

You must keep accounting records that include:

  • all money received and spent by the company
  • details of assets owned by the company
  • debts the company owes or is owed
  • stock the company owns at the end of the financial year
  • the stocktakings you used to work out the stock figure
  • all goods bought and sold
  • who you bought and sold them to and from (unless you run a retail business)

You must also keep any other financial records, information and calculations you need to prepare and file your annual accounts and Company Tax Return. This includes records of:

  • all money spent by the company, for example receipts, petty cash books, orders and delivery notes
  • all money received by the company, for example invoices, contracts, sales books and till rolls
  • any other relevant documents, for example bank statements and correspondence

You can be fined £3,000 by HMRC or disqualified as a company director if you do not keep accounting records.

How long to keep records

You must keep records for 6 years from the end of the last company financial year they relate to, or longer if:

  • they show a transaction that covers more than one of the company’s accounting periods
  • the company has bought something that it expects to last more than 6 years, like equipment or machinery
  • you sent your Company Tax Return late
  • HMRC has started a compliance check into your Company Tax Return

If your records are lost, stolen or destroyed

If you cannot replace your records after they were lost, stolen or destroyed you must:

  • do your best to recreate them
  • tell your Corporation Tax office straight away
  • include this information in your Company Tax Return

For further information and guidance, please check Running a limited company

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Registered in England and Wales
Company Registration Number: 08573314
Registered Office: International House, 24 Holborn Viaduct, London EC1A 2BN

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