What you must do as a Construction Industry Scheme (CIS) contractor

Overview

You must register as a contractor with the Construction Industry Scheme (CIS) if:

you pay subcontractors to do construction work

You may be a sole trader, in a partnership or own a limited company.

If you’re not sure if you need to register, check who is covered by CIS.

Rules you must follow

You must register for CIS before you take on your first subcontractor.

You must check if you should employ the person instead of subcontracting the work. You may get a penalty if they should be an employee instead.

Check  with HM Revenue and Customs (HMRC) that your subcontractors are registered with CIS.

When you pay subcontractors, you’ll usually need to make deductions  from their payments and pay the money to HMRC. Deductions count as advance payments towards the subcontractor’s tax and National Insurance bill.

You’ll need to file monthly returns and keep full CIS records - you may get a penalty if you do not.

You must let HMRC know about any changes to your business.

Who is covered by CIS

The Construction Industry Scheme (CIS) covers most construction work to buildings, including site preparation, decorating and refurbishment.

Mainstream contractors

If your business is construction and you pay subcontractors for construction work, you’re a ‘mainstream’ contractor. This applies if you’re a:

builder

labour agency

gangmaster (or gang leader)

property developer

Deemed contractors

You count as a ‘deemed’ contractor if your business does not do construction work but you have spent more than £3 million on construction in the 12 months since you made your first payment. This could apply to:

housing association or arm’s length management organisations (ALMOs)

local authorities

government departments

You must monitor your construction spend if you are likely to become a deemed contractor.

Exceptions for contractors

CIS does not apply if your work is:

paid for by a charity or trust

paid for by a governing body or head teacher of a maintained school on behalf of the local education authority

on the subcontractor’s own property and worth less than £1,000 excluding materials - you must call the CIS helpline to get an exemption

CIS also does not apply if you’re a deemed contractor paying for:

work on property (that is not for sale or rent) for your own business use

a construction contract worth less than £1,000 excluding materials - you must call the CIS helpline to get an exemption

Construction work not covered by CIS

There are also certain jobs that are exempt from the scheme, including:

architecture and surveying

scaffolding hire (with no labour)

carpet fitting

delivering materials

work on construction sites that is clearly not construction, for example running a canteen or site facilities

The CIS guide for contractors and subcontractors explains in full what type of work is covered by CIS.

How to register

To register as a contractor, you need to follow the process for setting up as a new employer.

When done, you’ll get a letter from HM Revenue and Customs (HMRC) with the information you need to start working as a Construction Industry Scheme (CIS) contractor.

If your business is based outside the UK but you do construction work here, you follow a different registration process.

Help with registering

If you need help, call the new employer helpline or the CIS helpline.

You can also sign up for webinars and emails or watch videos from HMRC about CIS.

Verify subcontractors

Before you can pay a new subcontractor, you’ll need to ‘verify’ them with HM Revenue and Customs (HMRC).

HMRC will tell you:

whether they’re registered for the Construction Industry Scheme (CIS)

what rate of deduction to use or if you can pay them without making deductions

You must also verify subcontractors you’ve used before if you have not included them on a CIS return in the current or last 2 tax years.

How to verify

You can verify subcontractors using:

the free HMRC CIS online service

commercial CIS software

If you need to verify more than 50 subcontractors you’ll need to use commercial CIS software.

What you’ll need

Make sure you have:

your Unique Taxpayer Reference (UTR)

the reference number for your HMRC accounts office

your HMRC employer reference

You’ll also need your subcontractor’s:

UTR

National Insurance number if they’re a sole trader - you cannot verify temporary numbers, which start with ‘TN’ or 2 digits

company name, company UTR and registration number if they’re a limited company

nominated partner details, trading name and partnership UTR if they’re a partnership

The details you provide to verify the subcontractor must exactly match the details the subcontractor used to register with HMRC.

Make deductions and pay subcontractors

When you pay a subcontractor, you usually make some deductions from their payments.

HM Revenue and Customs (HMRC) will tell you how much to deduct from a subcontractor’s payments when you verify them.

The Construction Industry Scheme (CIS) deduction rates are:

20% for registered subcontractors

30% for unregistered subcontractors

0% if the subcontractor has ‘gross payment’ status - for example they do not have deductions made

You must pay these deductions to HMRC - they count as advance payments towards the subcontractor’s tax and National Insurance bill.

How to make a CIS deduction

To make a deduction from a subcontractor’s payment, start with the total (gross) amount of the subcontractor’s invoice.

Take away the amount the subcontractor has paid for:

VAT

materials

equipment which is now unusable (‘consumable stores’)

fuel used, except for travelling

equipment hired for this job (‘plant hire’)

manufacturing or prefabricating materials

Only deduct materials the subcontractor has paid for directly. Ask the subcontractor for evidence that they paid for the materials if you’re unsure.

Finally, deduct the CIS percentage rate (as given to you by HMRC) from the amount left. You’ll be left with the net amount you need to pay the subcontractor.

Paying subcontractors

You usually pay your subcontractors directly. But you can pay them through a third party (such as a relative or debt company) if they ask you to.

If you make deductions, you must give the subcontractor a payment and deduction statement within 14 days of the end of each tax month.

If you’re not making payments

If you know you’re not going to make any payments to subcontractors for up to 6 months, you can ask for your scheme to be made ‘inactive’. HMRC will not send you any returns for that period.

You must file a return when you start paying subcontractors again.

Pay deductions to HMRC

You must pay HM Revenue and Customs (HMRC) any deductions you’ve made.

HMRC will set up a Construction Industry Scheme (CIS) payment scheme for you when you register as a contractor.

If you already have employees, HMRC will change your existing PAYE Scheme to a PAYE/CIS scheme. You should make one payment each month or quarter to cover your PAYE tax, National Insurance and CIS deductions.

When and how to pay

Pay HMRC every month by the 22nd (or the 19th if you’re paying by post). You may be charged interest and penalties if you pay late.

Pay CIS deductions to HMRC in the same way as PAYE and National Insurance payments.

File your monthly returns

You must tell HM Revenue and Customs (HMRC) each month about payments you’ve made to subcontractors through your monthly return.

You can file returns by using:

the HMRC CIS online service

some commercial CIS software

On your return, you must declare that the subcontractors listed are not employees.

You could get a penalty of up to £3,000 if you give the wrong employment status for a subcontractor on your monthly return.

If you made no payments

You do not have to file a return for the months when you made no payments to subcontractors, but you must tell HMRC that no return is due.

You can contact HMRC to make an ‘inactivity request if you’ve temporarily stopped using subcontractors. This lasts for 6 months.

You must tell HMRC if you start using subcontractors again.

Phone lines are currently busier than usual because of coronavirus (COVID-19). You can use your online account to tell HMRC.

Using commercial CIS software

Your return must not include any negative values if you’re using commercial CIS software.

If any entries come to less than 0, you should put ‘0’ instead.

HMRC might ask you later to give details of any entries you’ve replaced.

Deadlines

Send your monthly returns to HMRC by the 19th of every month following the last tax month.

Penalties for late returns

You’ll get a penalty if you miss the deadline for filing returns.

The penalty will be cancelled if you let HMRC know that you did not pay any subcontractors that month.

How late the return is | Penalty

1 day late | £100

2 months late | £200

6 months late | £300 or 5% of the CIS deductions on the return, whichever is higher

12 months late | £300 or 5% of the CIS deductions on the return, whichever is higher

For returns later than this, you may be given an additional penalty of up to £3,000 or 100% of the CIS deductions on the return, whichever is higher.

Pay your late filing penalty.

If you disagree with a penalty

You can appeal within 30 days of the date on the penalty notice:

through HMRC’s online service

by writing to HMRC - quote your Unique Taxpayer Reference (UTR) and the payment reference shown on the notice

Correcting or changing returns

Use the HMRC CIS online service to change or correct something on your return.

Call the CIS helpline if you need any help with this.

Record keeping

Under the Construction Industry Scheme (CIS), you must keep records of:

the gross amount of each payment invoiced by subcontractors, excluding VAT

any deductions you’ve made from subcontractor payments

If you made deductions, you must also keep records of the costs of materials the subcontractor invoiced you for, excluding VAT.

Keep these details for at least 3 years after the end of the tax year they relate to. HM Revenue and Customs (HMRC) could ask to see your CIS records at any time.

You could be fined up to £3,000 if you cannot show your CIS records when asked by HMRC.

Tell HMRC about changes

You must tell HM Revenue and Customs (HMRC) if:

you change address (as an individual or business)

you change your business structure - for example from sole trader to limited company or vice versa

a contractor dies

you’re a multiple contractor and you take on another contractor’s business - you must tell HMRC within 90 days

If you stop trading or using subcontractors

You must:

tell HMRC

stop filing monthly CIS reports

Do this even if you’ve stopped using subcontractors temporarily, for example because you’re using your own employees to carry out work.

If you’ve temporarily stopped using subcontractors

You can contact HMRC to make an ‘inactivity request’ if you’ve temporarily stopped using subcontractors. This lasts for 6 months.

You must tell HMRC if you start using subcontractors again.


What you must do as a Construction Industry Scheme (CIS) subcontractor

Overview

You should register for the Construction Industry Scheme (CIS) if you work for a contractor and you’re one of the following:

self-employed

the owner of a limited company

a partner in a partnership or trust

Under CIS, a contractor must deduct 20% from your payments and pass it to HM Revenue and Customs (HMRC).

These deductions count as advance payments towards your tax and National Insurance bill.

If you do not register for the scheme, contractors must deduct 30% from your payments instead.

If you do not want deductions made

If you do not want deductions to be made in advance by contractors, you can apply for ‘gross payment status’. You can do this when you register for CIS.

You do not need to register for CIS if you’re an employee. Check your employment status if you’re not sure.

How to register

To register for the Construction Industry Scheme (CIS) you’ll need:

your legal business name - you can also give a trading name if it’s different to your business name

your National Insurance Number

the unique taxpayer reference number (UTR) for your business

your VAT registration number (if you’re VAT registered)

If you’re a subcontractor and a contractor (you pay subcontractors to do construction work), you’ll need to register for CIS as both.

Register as a sole trader

If you’re a sole trader and you already have a UTR, you can register for CIS online. You’ll need the Government Gateway user ID and password you used when you registered for Self Assessment (or another government service).

You can apply for gross payment status at the same time.

If you do not have a UTR, register as a new business for Self Assessment and choose ‘working as a subcontractor’ when prompted. You’ll be registered for Self Assessment and CIS at the same time.

You can also call the CIS helpline to register.

Register as another type of business

Fill in the online form for limited companies or the online form for partnerships.

HMRC will register the partnership separately to your sole trader registration. They will need the partnership UTR and trading name.

You are based abroad

You should still register for CIS if you are a subcontractor based abroad but do construction work in the UK.

Help and support

Call the CIS helpline for help with registering.

You can also sign up for webinars and emails or watch videos from HMRC about CIS.

Get paid

To be paid correctly by a contractor, make sure you give them the exact same legal business name or trading name you gave when you registered for the Construction Industry Scheme (CIS). You should also give them your Unique Taxpayer Reference (UTR) so they can verify you.

If you do not, this could affect how much you get paid.

Deduction rates

When a contractor pays you under CIS, they’ll normally make deductions at the standard rate of 20%.

Contractors will make deductions at a higher rate of 30% if:

you are not registered for CIS

they cannot verify you

you give the wrong name for your business

Your contractor should give you monthly statements of payments and deductions. Use them to calculate whether you still owe tax and National Insurance to HM Revenue and Customs (HMRC) or are due a refund.

Gross payment status

You can apply for gross payment status when you register for CIS. This means the contractor will not make deductions from your payments and you’ll pay all your tax and National Insurance at the end of the tax year.

What does not count as your pay

Contractors will not make a deduction from amounts you charge on your invoice for:

VAT

materials that you have paid for directly

equipment which is now unusable (‘consumable stores’)

plant hired for the job

manufacturing or prefabricating materials

Pay tax and claim back deductions

When you’re registered with the Construction Industry Scheme (CIS), you’re still responsible for paying the correct tax and National Insurance for your business, even if deductions have been made by contractors throughout the year.

Contractors will give you a monthly statement of what they’ve paid you and deductions they’ve made to help with your accounting.

Sole traders and partners

At the end of the tax year, send in your Self Assessment tax return as usual. You should record:

the full amounts on your invoices as income

any deductions contractors have made in the ‘CIS deductions’ field

HM Revenue and Customs (HMRC) will work out your tax and National Insurance bill and take off any deductions made by contractors.

If you still owe tax after this, you’ll need to pay it by 31 January following the end of the tax year.

If you’re due a tax refund, HMRC will pay the money back.

Limited companies

If you have gross payment status, declare all your income in your Corporation Tax return as usual.

If you pay CIS deductions, you must claim these back through your company’s monthly payroll scheme. Do not try to claim back through your Corporation Tax return - you may get a penalty if you do.

Send your monthly Full Payment Submission (FPS) as usual to HMRC.

Also send an Employer Payment Summary (EPS). Enter the total CIS deductions for the year to date.

HMRC will take your CIS deductions off what you owe in PAYE tax and National Insurance. Pay the balance by the usual date.

If your company’s PAYE bill for the period is reduced to zero and you still have some CIS deductions you have not been able to claim back, carry these forward to the next month or quarter (in the same tax year). Tell HMRC in the EPS that you have nothing to pay.

If HMRC thinks your claim is wrong

HMRC may ask you to provide evidence for your CIS deductions or to change your claim.

If you do not do this by the deadline they give you, you will not be able to make any more claims in that tax year.

You can appeal HMRC’s decision. They’ll tell you how to do this.

Keep records

Your company must keep a record of amounts claimed back against your monthly or quarterly PAYE bill.

You can use form CIS132 to do this or keep your own records.

If you paid too much in CIS deductions

HMRC will pay back any deductions your company has not been able to claim back from its PAYE bill during the tax year.

If your company goes into administration

If your company goes into administration or liquidation, the person managing it should write to HMRC to ask for CIS deductions to be repaid straight away.

If you do not have all your CIS statements

If you have not received all the CIS statements you need from your contractor, you can ask them to send you replacement copies.

If the contractor you’re working for stops trading and you have not been able to get all your CIS statements you should write to HMRC.

Include the following information:

your name, address and Unique Taxpayer Reference (UTR)

the name and address of the contractor

the contractor’s tax reference - if you know it

the dates of the payments or the tax months when the contractor paid you

the reason why you do not have the statements or duplicates

How to get gross payment status

You can apply for gross payment status when you register for CIS.

This means contractors will pay you in full, without deductions. You’ll pay all your tax and National Insurance at the end of the tax year.

If you’re already registered for CIS, you can apply for gross payment status by calling the CIS helpline or applying online.

Apply for gross payment status online

Sign in to Government Gateway - you’ll need the Government Gateway user ID and password you used when you registered for CIS. If you do not have a user ID, you can create one when you register for CIS.

From ‘Your tax account’, go to ‘Other services’.

Choose ‘Construction Industry Scheme – Subcontractors’.

To qualify

You must show HM Revenue and Customs (HMRC) that your business passes some tests. You’ll need to show that:

you’ve paid your tax and National Insurance on time in the past

your business does construction work (or provides labour for it) in the UK

your business is run through a bank account

HMRC will look at your turnover for the last 12 months. Ignoring VAT and the cost of materials, your turnover must be at least:

£30,000 if you’re a sole trader

£30,000 for each partner in a partnership, or at least £100,000 for the whole partnership

£30,000 for each director of a company, or at least £100,000 for the whole company

If your company’s controlled by 5 people or fewer, you must have an annual turnover of £30,000 for each of them.

You could be fined if you provide false information or help someone else to make a false application.

Paying tax when you have gross payment status

You must declare your payments as income at the end of the tax year in:

your Self Assessment tax return if you’re a sole trader or partner

your Corporation Tax return if you own a limited company

Annual review

If you have gross payment status, HM Revenue and Customs (HMRC) will review your business every year, to decide if you can keep your status.

You must be on time with your tax returns and payments to keep your gross payment status.

If you run a limited company, HMRC will review the company itself, rather than individual directors or shareholders.

You do not meet all the conditions

You could fail the review and HMRC will remove your gross payment status. You’ll be allowed a small amount of late payments or returns.

Contact HMRC if you have problems paying your tax on time. If HMRC give you more time to pay, this will not affect your gross payment status.

You fail your review

You’ll get a letter explaining you’re about to fail the review, along with the reasons why.

If you disagree, you can write back with your reasons.

If HMRC accept your explanation, they will not remove your gross payment status.

If you do not reply to the letter or HMRC does not accept your explanation, they’ll write to explain:

what conditions you have not met

that they’re withdrawing your gross payment status in 90 days

If you think HMRC have made the wrong decision, you have 30 days from the date of this letter to appeal.

Reapplying for gross payment status

If HMRC cancel your gross payment status, you need to wait a year from the date of the cancellation before you can reapply.

Changes you need to report

Report changes by calling the Construction Industry Scheme (CIS) helpline.

Tell them if you:

change from a sole trader to a partnership

leave a partnership or company to become a sole trader

create a company or change your business to a company

You’ll usually need to register again for CIS - as you cannot transfer the registration from your old business structure.

If you have gross payment status, you’ll need to apply again.

You must also tell HM Revenue and Customs (HMRC) if you:

change your trading name

change your business, private or registered office address

stop trading

add new shareholders - HMRC may withdraw your gross payment status if you do not tell them within 30 days

Stop trading

If your business goes into administration it can keep receiving payments for work it’s done under CIS. It should be paid in the same way that it was paid normally - either gross or under deduction.


Work out your capital allowances

Writing down allowances

When you buy business assets you can usually deduct the full value from your profits before tax using annual investment allowance (AIA).

Use writing down allowances instead if:

the item doesn’t qualify for AIA (for example, cars, gifts or things you owned before you used them in your business)

Writing down allowances is when you deduct a percentage of the value of an item from your profits each year.

The percentage you deduct depends on the item. For business cars the rate depends on their CO2 emissions.

Work out the value of your item

In most cases, the value is what you paid for the item. Use the market value (the amount you’d expect to sell it for) instead if:

you owned it before you started using it in your business

it was a gift

How to claim

Group the things you’ve bought into ‘pools’ based on the percentage rate they qualify for.

When you know the rate for your items, work out how much you can claim and deduct it from your profits before tax on your tax return.

The amount left in each pool becomes the starting balance for the next accounting period.

Rates and pools

If you’re claiming writing down allowances, group items into pools depending on which rate they qualify for.

The 3 types of pool are the:

main pool with a rate of 18%

special rate pool with a rate of 6%

single asset pools with a rate of 18% or 6% depending on the item

Main rate pool

Add the value of all ‘plant and machinery’  you’ve bought to the main rate pool, unless they’re in:

the special rate pool

a single asset pool (for example, because you have chosen to treat them as ‘short life’ assets or you’ve used them outside your business)

Special rate pool

You have to claim a lower rate of 6% on:

parts of a building considered integral - known as ‘integral features’

items with a long life

thermal insulation of buildings

cars with CO2 emissions over a certain threshold - check the threshold for your car, which depends on the car and when you bought it

You can claim AIA on these items apart from cars. Only claim writing down allowances at 6% if you’ve already claimed AIA on items worth a total of more than the AIA amount.

Integral features

Integral features are:

lifts, escalators and moving walkways

space and water heating systems

air-conditioning and air cooling systems

hot and cold water systems (but not toilet and kitchen facilities)

electrical systems, including lighting systems

external solar shading

Buildings themselves don’t qualify for capital allowances.

Items with a long life

These are items with a useful life of at least 25 years from when they were new.

Put them in the special rate pool if the value of all the long-life items you buy in a single accounting period (the tax year if you’re a sole trader or partner) adds up to £100,000. Put them in the main rate pool if their total value is less than £100,000.

This £100,000 limit is adjusted if your accounting period is more or less than 12 months.

Single asset pools

You might need to create one or more separate pools for single assets that:

have a short life (for assets you aren’t going to keep for a long time)

you use outside your business if you’re a sole trader or a partner

Short life assets

It’s up to you to decide whether you want to treat something as a short life asset. You can’t include:

cars

items you also use outside your business

special rate items

Large numbers of very similar items can be pooled together (for example, crockery in a restaurant).

The pool ends when you sell the asset. This means you can claim the capital allowances over a shorter period.

Move the balance into your main pool in your next accounting period or tax year if you’re still using the item after 8 years.

Let HMRC know

Let HM Revenue and Customs (HMRC) know on your tax return if you’re a limited company and you decide to create a short life asset pool. You must do this within 2 years of the end of the tax year when you bought the item.

Let HMRC know in writing if you’re a sole trader or partner - include how much the item cost and when you acquired it. The deadline is the online filing deadline (31 January) for the tax year after the one you bought the item in.

Things you also use outside your business

If you use an item outside your business and you’re a sole trader or partner, put it in a separate pool.

Work out your capital allowances at the main rate (18%) or the special rate (6%) depending on what the item is.

Reduce the amount of capital allowances you can claim by the amount you use the asset outside your business.

If your accounting period is more or less than 12 months

You need to adjust the amount of writing down allowances you can claim if your accounting period is more or less than 12 months.

Items you’ve claimed AIA or first year allowances on

Record any items you’ve claimed annual investment allowance (AIA) or first year allowances on in the pool they qualify for. If you claim the full cost of an item you’ll need to write down their value as zero. This will help you to work out whether you owe tax if you sell them.

Items not claimed

Add costs you haven’t claimed first year allowances or annual investment allowance (AIA) on to the pool in the following year.

What to do next

When you know the rate for your items, work out how much you can claim.

Work out what you can claim

You can claim the full cost of the item if you’re claiming:

annual investment allowance (AIA)

first year allowances

You claim based on the rate for items that don’t qualify for AIA or first year allowances.

Work out your allowance

Work out what you can claim separately for each pool.

Take your closing balance from your last accounting period.

Add the value of anything you’ve bought or been given in the current period that qualifies for this pool. Only include VAT if you’re not VAT registered.

Deduct the value of anything you sold or ‘disposed of’ that originally qualified for this pool.

Work out how much you can claim using the correct rate.

Deduct the amount you can claim from the pool to get the closing balance. This is known as the ‘tax written down value’.

Items you use outside your business

For items that are in a single asset pool because you’ve used them outside your business, reduce the amount you can claim by the amount you use them privately.

You still deduct the full amount from your pool to get the closing balance.

Items you use privately that aren’t in a single asset pool

If you start using something outside your business that you’ve already claimed capital allowances on:

add the market value of the item (the amount you’d expect to sell it for) to a single asset pool

deduct the same amount from the pool it was in

If the amount you deduct is more than the balance in the pool, the difference is a ‘balancing charge’ - you must put it on your tax return.

Claiming less than you’re entitled to

You don’t have to claim the full amount you’re entitled to. If you only claim part, the rest stays in your closing balance.

If you have £1,000 or less in your pool

You can claim the full amount if the balance in your main or special rate pool is £1,000 or less before you work out your allowance.

This is called a small pools allowance. It doesn’t apply to single asset pools. You can either claim a small pools allowance or writing down allowances - you can’t claim both.

This amount is adjusted if your accounting period is more or less than 12 months.

How to claim

Claim on your tax return.


Your limited company's first accounts and Company Tax Return

Overview

When you set up your limited company, you automatically get different reporting dates for the first:

annual accounts you send to Companies House

Company Tax Return you send to HM Revenue and Customs (HMRC)

You may also have to send (‘file’) 2 tax returns to cover your first year in business.

Annual accounts

Your first accounts usually cover more than 12 months. This is because they:

start on the day your company was set up (‘incorporated’)

end on the ‘accounting reference date’ that Companies House sets for the end of your company’s financial year - this is the last day of the month your company was set up

Company Tax Return

The period covered by your tax return (your ‘accounting period’ for Corporation Tax) can’t be longer than 12 months. So you may have to file 2 tax returns to cover the period of your first accounts. If you do, you’ll also have 2 payment deadlines.

In following years you then normally only file one tax return - and it will usually cover the same financial year as your accounts.

What you must do

The dates of your first tax return - and whether you file 2 or one - depend on whether your company:

didn’t start trading until after it was set up

You started trading the day your company set up

File 2 Company Tax Returns if your company started trading on the same day it was set up - one for your company’s first 12 months and one for the rest of the time covered by your company’s first accounts.

Example

Action | Date

Company set up and started trading | 11 May 2013

First accounting period for Corporation Tax ends | 10 May 2014

Accounting reference date | 31 May 2014

Second accounting period for Corporation Tax ends | 31 May 2014

Prepare your first set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for 11 May 2013 to 10 May 2014

second tax return for 11 to 31 May 2014

After you do this, your accounts and tax returns will normally cover your company’s financial year from 1 June to 31 May.

You started trading after your company set up

Limited companies can be ‘dormant’ for Corporation Tax between setting up (‘incorporating’) and starting to trade for the first time.

HM Revenue and Customs (HMRC) has detailed guidance on what counts as dormant for Corporation Tax.

You tell HMRC the date that you started to trade when you register for Corporation Tax.

What you have to do if your company was dormant depends on whether you registered for Corporation Tax before your accounting reference date.

You registered for Corporation Tax before your accounting reference date

You usually:

don’t file a tax return for the period you were dormant

prepare your first tax return to cover the period you were trading

File 2 tax returns if you were trading for more than 12 months - one for the first 12 months of trading and one for the rest of the time.

Example

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Register for Corporation Tax | 26 August 2013

Accounting reference date | 31 May 2014

Prepare accounts for 11 May 2013 to 31 May 2014. Then file one tax return for your trading period from 22 July 2013 to 31 May 2014.

After you do this, your dates for accounts and tax returns will normally match your company’s financial year from 1 June to 31 May every year.

Check the ‘notice to deliver a Company Tax Return’ you get after your first year. If it covers your dormant and trading periods you must file 2 tax returns - one for your trading period and one for your dormant period.

You didn’t register for Corporation Tax before your accounting reference date

You must file 2 tax returns - one for the period you were dormant and one for the period you were trading.

Example:

Action | Date

Company set up | 11 May 2013

Started trading | 22 July 2013

Accounting reference date | 31 May 2014

Prepare one set of accounts for 11 May 2013 to 31 May 2014. Then file your:

first tax return for your dormant period from 11 May to 21 July 2013

second tax return for your trading period from 22 July 2013 to 31 May 2014


Find software for filing company documents

Overview

You can use software to file your company accounts, file changes to your details and returns to Companies House electronically.

You can also file your annual accounts and confirmation statement (previously annual return) with Companies House online.

Using software or filing online you’ll:

be less likely to get late filing penalties

get confirmation that your documents have been received

find out if they’re accepted or rejected

How to file electronically

You must register for an online filing account - fill in the online filing credit account application form and send it to the address on the form.

You can then either:

get a software package from a Companies House (and HMRC) authorised provider

develop your own software - request a copy of the Companies House technical specifications by emailing xml@companieshouse.gov.uk

Filing annual accounts, returns and tax accounts

Companies House has tested the software listed.

You should consider which features you need and make sure the software you choose has those features, for example if you need software to deal with inactive accounts (sometimes called ‘dormant accounts’).

You must first register as an electronic filer.

The following is a list of software and the kinds of accounts you can use it for.

Supplier | Product | Dormant | Micro Entity | Abridged | Small | Full

Ajaccts | AJACCTS | Yes | Yes | - | - | -

Acorah Software Products Ltd | TaxCalc Accounts Production | Yes | Yes | Yes | Yes | Yes

Anglia Registrars Ltd | Inform Direct | Yes | Yes | - | - | -

BTCSoftware Limited | AP Solution | Yes | Yes | Yes | Yes | Yes

Capium Limited | Capium Accounts Production | Yes | - | Yes | - | -

CaseWare UK | CaseWare Accounts Production | Yes | Yes | Yes | Yes | Yes

CCH Software (Wolters Kluwer) | CCH iXBRL Review & Tag | Yes | Yes | Yes | Yes | Yes

CCH Software (Wolters Kluwer) | CCH Accounts Production | Yes | Yes | Yes | Yes | Yes

CoreFiling Limited | Seahorse | Yes | Yes | Yes | Yes | Yes

Easy Digital Filing | Easy Digital Filing | Yes | Yes | Yes | Yes | -

Eureka Software | Eureka Software | - | Yes | Yes | Yes | -

Forbes Computer Systems Ltd | Forbes Accounts, Forbes Company Register, Forbes EINC | Yes | Yes | - | Yes | Yes

gbooks | gbooks Company Accounts | Yes | Yes | - | Yes | Yes

IRIS Software | IRIS Accounts Production | Yes | Yes | Yes | Yes | Yes

IRIS Software | PTP Accounts Production | Yes | Yes | Yes | Yes | Yes

Keytime | Accounts Production | Yes | Yes | Yes | Yes | Yes

Quality Management Software Ltd | CT600CH | Yes | Yes | Yes | Yes | Yes

Sage (UK) Limited | Sage Accounts Production | Yes | Yes | Yes | Yes | Yes

Sage (UK) Limited | Sage Accountant Cloud - Final Accounts | Yes | Yes | Yes | Yes | Yes

Sage (UK) Limited | Sage Accounts Production Advanced | Yes | Yes | Yes | Yes | Yes

Taxfiler | Taxfiler Accounts Production | Yes | Yes | Yes | Yes | -

Thomson Reuters | Digita | Yes | Yes | Yes | Yes | Yes

Thomson Reuters | ONESOURCE | Yes | Yes | Yes | Yes | Yes

VT Software Limited | VT Filer | Yes | Yes | Yes | Yes | Yes

Xero | Xero Tax | Yes | Yes | Yes | Yes | -

Software for Limited Liability Partnerships (LLPs)

Supplier | Product

BTCSoftware Limited | AP Solution

CaseWare UK | CaseWare Accounts Production

CCH Software (Wolters Kluwer) | CCH iXBRL Review & Tag

CoreFiling Limited | Seahorse

Eureka Software | Eureka Software

gbooks | gbooks Company Accounts

IRIS Software | IRIS Accounts Production

IRIS Software | PTP Accounts Production

Keytime | Accounts Production

Sage (UK) Limited | Sage Accounts Production

Sage (UK) Limited | Sage Accounts Production Advanced

Taxfiler | Taxfiler Accounts Production

Thomson Reuters | Digita

VT Software Limited | VT Filer

Software for charities

Supplier | Product

BTCSoftware Limited | AP Solution

CoreFiling Limited | Seahorse

IRIS Software | PTP Accounts Production

Keytime | Accounts Production

Uploading your accounts to Companies House

Tax account software generates electronic accounts in Inline eXtensible Reporting Language (iXBRL).

The following software has a direct filing link to Companies House:

Supplier | Product

eFile Ready Limited | eCompany Services

The following software can validate your iXBRL:

Supplier | Product

Xmetric Limited | Surefile Accounts

Filing other company information

Companies House has tested and authorised software for filing information about:

incorporations (registering a new company)

changes to your company, for example directors joining or leaving, changing a registered address, and filing annual returns

mortgages, for example when they’re paid or part-paid

You should consider which features you need and make sure the software you choose has those features.

Supplier | Product(s) | Incorporations | Secretarial | Mortgages

121 Company Formation Ltd | 121 Company Formation | Yes | Yes | No

Acorah Software Products Ltd | TaxCalc Company Secretarial | Yes | Yes | No

Advanced | Cloud Forms (Laserform Hub) | No | Yes | MR01, MR02, MR04 and MR05

angelPRO Limited | VenturePro | No | Yes | No

Anglia Registrars Ltd | Inform Direct | Yes | Yes | Yes

BGL Corporate Solutions Ptd Ltd | Corporate Affairs System (CAS) | Yes | Yes | No

BHIS Limited | PC Share Register Plus | Yes | Yes | No

BritDAQ | BritDAQ Cosec | No | Yes | No

BTC Software Limited | CS Solution | Yes | Yes | No

Build and Prosper Ltd | File Direct 6 | Yes | Yes | No

CFS International Formations LTD | CFS Formations and Free Secretarial Package | Yes | Yes | No

The Company Formation Wizard | Company Formation Wizard | Yes | Yes | No

Computershare Governance Services | Global Entity Management System (GEMS), Secretariat One (S1) | Yes | Yes | No

Corporatek | EnGlobe, GlobalAct | No | Yes | No

Diligent Entities | Blueprint | Yes | Yes | MR04, MR05 only

Efaze Ltd BVI | Efaze.com company formations | Yes | Yes | No

eFile Ready Limited | eCompany Services | Yes | Yes | No

E Filing Limited | E Filing Limited | Yes | Yes | No

First Corporate | First Order | Yes | Yes | No

Forbes Computer Systems Ltd | Forbes Accounts, Forbes Company Register, Forbes EINC | Yes | Yes | No

Formations Direct | Vectis | Yes | Yes | No

FormEvo | FormEvo | No | Yes | MR01, MR02, MR04 and MR05

gbooks | gbooks Company Forms, gbooks Incorporation | Yes | Yes | No

Info Commerce Limited | Acs1, Sec1, Inc1 | Yes | Yes | No

IRIS Software | IRIS Accountancy Suite | Yes | Yes | No

Jordans Limited | Incorporator, Forming Companies, My Formations, PCSec administration software | Yes | Yes | No

Keytime Objective Ltd | Company Secretarial | No | Yes | No

Kudocs | Kudocs | Yes | Yes | No

LTDONLINE Ltd | LTDONLINE | Yes | Yes | No

Online Filings Ltd | Online Filings | Yes | Yes | No

Oswalds (Jordans [Scotland] Ltd) | Incorporator, Forming Companies, PCSec administration software | Yes | Yes | No

Oyez | The Oyez Gateway | No | No | Yes

Panlegis (Malta) Limited | Panlegis (Malta) Limited | Yes | Yes | No

Principal Consultancy Ltd | Your Limited Company | Yes | Yes | No

Armadillo | Armadillo e-Incorp | Yes | Yes | No

Sage (UK) Limited | Sage Accounts Production Advanced, Sage Company Secretarial | No | Yes | No

Thomson Reuters | Onvio Formations | Yes | No | No

zetVisions AG | zetVisions CIM | No | Yes | No


Avoid and report anti-competitive activity

Overview

All businesses, whatever their size, must understand how they’re affected by competition law.

You must follow the rules on all types of anti-competitive activity including:

price fixing, bid rigging and other ways of agreeing not to compete (sometimes called ‘cartels’)

abuse of a dominant market position

You should manage the risk of breaking the law, for example by having clear policies, guidelines and training for your staff.

You can report anti-competitive activity if you think another business is breaking the law, or if you might have been involved yourself.

If you’re involved in anti-competitive activity

Your business can be fined up to 10% of its worldwide turnover and sued for damages.

You can be fined or sent to prison for up to 5 years if you’re found guilty of being involved in cartel activity.

Company directors can be disqualified from being a director for up to 15 years.

Get legal advice or contact the Competition Pro Bono Scheme if you think something your business is doing might break the law.

Types of anti-competitive activity

You must avoid all types of anti-competitive activity in your business including:

agreeing not to compete with another business

abusing a dominant position

You can report anti-competitive activity if you see it.

Agreeing not to compete with another business (‘cartels’)

If 2 or more businesses agree not to compete with each other in certain ways, it’s called a ‘cartel’.

The rules on cartels apply to businesses of any size.

Rules about cartels cover:

price fixing

bid rigging

sharing markets or customers

sharing commercially sensitive information

An agreement does not have to be in writing for it to be illegal. You can break the law if you have an informal conversation (or ‘gentleman’s agreement’) with another business, even if the agreement is not carried out.

You can work with other businesses without breaking competition law. Get legal advice or contact the Competition Pro Bono Scheme if you need to, and make sure you manage any risks.

Price fixing

You must not discuss the prices you’re going to charge your customers with your competitors.

You’ll be breaking the law if you agree with another business:

to charge the same prices to your customers

to offer discounts or increase your prices at the same time

to charge the same fees to intermediaries, for example retailers selling your products

Bid rigging

You cannot discuss bids for a contract tender with your competitors. Bid rigging includes:

agreeing with your competitors how much you’ll bid for a contract or share information about your bid

taking turns to win contracts

asking other businesses to bid when they do not want the contract (called ‘cover bids’)

paying other businesses not to bid or when you win a tender

agreeing with other businesses not to bid or to withdrawing your bid

Market sharing

You cannot agree with other businesses to share markets or customers. You’ll be breaking competition law if you agree with another business:

not to approach each other’s customers

not to compete with them for customers, for example in specific locations

Sharing information

You cannot share information with other businesses that might reduce competition between you, for example information about:

prices

production

your suppliers, customers or contractors

the markets you sell or plan to sell to

This includes sharing information through a third party, for example a trade association.

Abusing a dominant position

Your business might have a ‘dominant position’ in the market if:

it has more than a 40% market share

it’s not affected by normal competitive restraints

You might be abusing your dominant position if you’re unfair to your customers or other businesses, for example you:

treat customers differently, for example by offering different prices or terms to similar customers

make customers buy products they do not want, for example forcing them to take warranties for electrical products

charge low prices that do not cover your costs so you drive out competitors

If you think you have a dominant market position, get legal advice or contact the Competition Pro Bono Scheme to find out what you can and cannot do.

Other anti-competitive activities

You must avoid other activities that break competition law, eg:

buying or selling jointly with your competitors

agreeing with your competitors to reduce production of something to raise its market value

restricting how much other businesses can sell your product for

agreeing with your competitors not to sell to certain customers or deal with certain suppliers

having long-term exclusive contracts with any customers or suppliers

Manage risk

The people who run your business are responsible for ensuring it does not break competition law. You should:

work out where your business is at risk and how serious any risks are

set up policies, guidelines and training for your staff if you need to

Your business can still be given a penalty and sued for damages even if your senior managers did not know about the illegal activity.

Work out if your business is at risk

You’re more likely to be at risk if:

you or your employees have contact with your competitors, for example at conferences or trade association meetings

your employees regularly move to or from jobs with your competitors

you have partnerships with your competitors, for example joint buying or selling

you have any long-term exclusive contracts with any customers or suppliers

your business has a dominant position in any market where you do business

Set up policies, guidelines and training

You should ask a senior member of staff, for example a director, to make sure your employees know how to avoid and report anti-competitive behaviour.

There’s further guidance from the Competition and Markets Authority (CMA) on reducing the risk of your business breaking the law.

Report anti-competitive activity

The way you report anti-competitive activity depends on the type of activity.

Report a cartel

A cartel is where two or more businesses agree not to compete with each other, for example by sharing a market or fixing prices.

Contact the Competition and Markets Authority (CMA) cartels hotline if you:

know about a cartel

have been involved in one

You may:

get a financial reward for information that leads to an investigation

be treated with leniency if you report a cartel you’ve been involved with

Report other anti-competitive activity

Tell the CMA if you have concerns about anti-competitive activity. Email general.enquiries@cma.gov.uk with the following information:

your contact details

the business you have concerns about and a description of the issue along with any supporting evidence

the market area according to the UK Standard Classification Index

details of any other organisations you have contacted

If you want help with a consumer problem, contact Citizens Advice (or the Financial Conduct Authority for consumer credit-related issues).

Report your concerns to an industry regulator

You can also report concerns about anti-competitive activity in certain sectors to a regulator. These are:

Civil Aviation Authority for airports and air traffic services

Financial Conduct Authority for financial services in the UK

Monitor for health services in England

Ofcom for television, radio, telephone, postal and internet services

Ofgem for gas and electricity in England, Wales and Scotland

Ofwat for water and sewage services in England and Wales

Office of Road and Rail for railways in England, Wales and Scotland

Payment Systems Regulator for payment systems in the UK

Utility Regulator for gas, electricity, water and sewerage in Northern Ireland


Director's loans

Overview

A director’s loan is when you (or other close family members) get money from your company that is not:

a salary, dividend or expense repayment

money you’ve previously paid into or loaned the company

Records you must keep

You must keep a record of any money you borrow from or pay into the company - this record is usually known as a ‘director’s loan account’.

At the end of your company’s financial year

Include any money you owe the company or the company owes you on the ‘balance sheet’ in your annual accounts.

Tax on loans

You may have to pay tax on director’s loans. Your company may also have to pay tax if you’re a shareholder (sometimes called a ‘participator’) as well as a director.

Your personal and company tax responsibilities depend on whether the director’s loan account is:

overdrawn - you owe the company

in credit - the company owes you

If you owe your company money

You or your company may have to pay tax if you take a director’s loan.

Your personal and company tax responsibilities depend on how the loan is settled. You also need to check if you have extra tax responsibilities if:

you paid your company interest on the loan below the official rate

| Your company’s responsibilities if you’re a shareholder and director | Your personal responsibilities when you get a director’s loan

You repay the loan within 9 months of the end of your Corporation Tax accounting period | Use form CT600A when you prepare your Company Tax Return to show the amount owed at the end of the accounting period.If the loan was more than £5,000 (and you took another loan of £5,000 or more up to 30 days before or after you repaid it) pay Corporation Tax at 32.5% of the original loan, or 25% if the loan was made before 6 April 2016. After you permanently repay the original loan, you can reclaim the Corporation Tax - but not interest.If the loan was more than £15,000 (and you arranged another loan when you repaid it) pay Corporation Tax at 32.5% of the original loan, or 25% if the loan was made before 6 April 2016. After you permanently repay the original loan, you can reclaim the Corporation Tax - but not interest. | No responsibilities

You do not repay the loan within 9 months of the end of your Corporation Tax accounting period | Use form CT600A when you prepare your Company Tax Return to show the amount owed at the end of the accounting period.   Pay Corporation Tax at 32.5% of the outstanding amount, or 25% if the loan was made before 6 April 2016.   Interest on this Corporation Tax will be added until the Corporation Tax is paid or the loan is repaid.  You can reclaim the Corporation Tax - but not interest. | No responsibilities

The loan is ‘written off’ or ‘released’ (not repaid) | Deduct Class 1 National Insurance through the company’s payroll. | Pay Income Tax on the loan through a Self Assessment tax return

If the loan was more than £10,000 (£5,000 in 2013-14)

If you’re a shareholder and director and you owe your company more than £10,000 (£5,000 in 2013 to 2014) at any time in the year, your company must:

treat the loan as a ‘benefit in kind’

deduct Class 1 National Insurance

You must report the loan on a personal Self Assessment tax return. You may have to pay tax on the loan at the official rate of interest.

If you paid interest below the official rate

If you’re a shareholder and director, your company must:

record interest you pay below the official rate as company income

treat the discounted interest as a ‘benefit in kind’

You must report the interest on a personal Self Assessment tax return. You may have to pay tax on the difference between the official rate and the rate you paid.

Reclaim Corporation Tax

Your company can reclaim the Corporation Tax it pays on a director’s loan that’s been repaid, written off or released. You cannot reclaim any interest paid on the Corporation Tax.

Claim after the relief is due - this is 9 months and 1 day after the end of the Corporation Tax accounting period when the loan was repaid, written off or released. You will not be repaid before this.

You must claim within 4 years (or 6 years if the loan was repaid on or before 31 March 2010).

Reclaiming within 2 years

If you’re reclaiming within 2 years of the end of the accounting period when the loan was taken out, use form CT600A to claim when you prepare a Company Tax Return for that accounting period or amend it online.

Use form L2P with your Company Tax Return instead if either:

your tax return is for a different accounting period than the one when the loan was taken out

you’re amending your tax return in writing

Tell HMRC how you want the repayment in your Company Tax Return.

Reclaiming after 2 years

If you’re reclaiming 2 years or more after the end of the accounting period when the loan was taken out, fill in form L2P and either include it with your latest Company Tax Return or post it separately.

HMRC will repay your company by either:

using the details you gave in your latest Company Tax Return

sending a cheque to your company’s registered office address

If you lend your company money

Your company does not pay Corporation Tax on money you lend it.

If you charge interest

Interest you charge your company on a loan counts as both:

a business expense for your company

personal income for you

You must report the income on a personal Self Assessment tax return.

Your company must:

pay you the interest less Income Tax at the basic rate of 20%

report and pay the Income Tax every quarter using form CT61

You can request form CT61 online or call HM Revenue  and Customs.


Make changes to your private limited company

Overview

You must tell Companies House if you change your company’s:

name

address

directors and company secretaries, including changes to their details

type, for example becoming a public limited company or unlimited company

share, for example issuing new shares or changing your share structure

mortgages and loan guarantees (sometimes called ‘charges’), for example if the company takes out a secured loan

You may need your company’s agreement before you can make some changes.

You may also need to tell HM Revenue and Customs (HMRC) about company changes.

When to tell Companies House

You must tell Companies House within 14 days if you make changes to:

where you keep your company records

your directors, or their personal details change, for example their address

company secretaries

You must tell Companies House within 15 days if you make changes to your constitution or articles of association.

You must tell Companies House within a month if you issue more shares in your company.

You must tell Companies House all other changes within 21 days.

How to tell Companies House

You can either:

use the Companies House online service if it’s available for the change you need to make

download and fill in paper forms

Get agreement from your company

You usually need to get directors or entitled shareholders to vote (known as ‘passing a resolution’) on whether or not to make some changes.

Things that usually need a resolution include:

changing your company name

removing a director

changing your company’s constitution and articles of association - how your company is run

changing your company’s share structure

Most resolutions simply need more shareholders to agree than disagree (called an ‘ordinary resolution’). They may be simply done by a show of hands at a meeting. Ordinary resolutions are used for most routine changes, for example, increasing a company’s share capital.

Some decisions, for example changing your articles, might require a 75% or even 95% majority (called a ‘special resolution’ or ‘extraordinary resolution’).

Your company articles will usually tell you if you need a resolution, and what type it should be.

You must let your shareholders (and auditors if relevant) know when there’s going to be a vote on a resolution.

You must file special or extraordinary resolutions with Companies House within 15 days of passing them.

Shareholder voting for special and extraordinary resolutions

When you’re working out the majority in special or extraordinary resolutions you count the number of shares that give the owner the right to vote, rather than the number of shareholders.

How to hold a resolution

You do not always need to have a meeting to pass a resolution. If enough shareholders or directors have told you they agree, you can usually confirm the resolution in writing.

You must write to all shareholders letting them know about the outcome of a resolution.

Company name

A company can change its name either by:

a special resolution

permission given in the company’s articles of association

Your new name must follow all the rules for company names.

Your company name will not officially change until Companies House registers it.

Register online

You can use the Companies House online service to file changes of name by special resolution only.

It costs £8 to file, or £30 for the same-day service.

Register by post

If you’re applying by special resolution

Download and fill in form NM01.

You must attach a copy of your resolution with your application.

Send your form and a cheque for £10 to the address on the form, or £50 for the same-day service.

If you’re registering with permission from the articles of association

Download and fill in form NM04.

Company address

You must tell Companies House if you want to change:

your registered office address

the address where you keep your records, and which records you’ll keep there

Your address will not officially change until it’s registered at Companies House.

Your company’s new addresses must be in the same part of the UK that the company was registered (‘incorporated’).

For example, if your company was registered in Scotland, the new registered office address must be in Scotland.

You must re-incorporate your company if you move to another part of the UK, for example from England to Scotland.

Companies House will tell HM Revenue and Customs (HMRC) that you’ve changed your registered office address.

Register online

You can use the Companies House online service.

Register by post

Download and fill in a change of address form. Send your completed form to the Companies House address on the form.

Directors and company secretaries

You must tell Companies House about changes to your company’s directors and secretaries, such as:

new appointments

resignations

changes to personal details, for example residential addresses

Register online

Register by post

You can send your changes by post.

Download and fill in the change forms you need and send them to the address on the forms

Shares

You must tell Companies House about any changes to your company’s share structure that you make outside your annual return.

You may need a special resolution to change your company’s share structure. This includes if you:

change the number of shares the company has and their total value - this is your ‘share capital’ (the part of your company’s money that comes from shares)

change how your shares are distributed

cancel any of your shares

change (‘denominate’) your shares into other currencies

You must report all other changes to your share structure within 21 days.

Documents you must provide

You must include a notice about the change you’ve made and a statement declaring:

the company’s total number of shares

the total value of those shares

how many shares have been paid for or not paid for

This is sometimes known as a ‘statement of capital’.

Your shares may be normal (‘ordinary’) or have special rights or restrictions.

For each type of share your company has, you must declare:

the rights that come with it

how many of the shares are issued

their total value before any additional costs are added

An accountant can help you prepare your statement of capital.

Register online

You can register changes to the shares your company issues online.

You must register all other changes to your shares by post.

Register by post

You can send your changes by post. Download and fill in the share change forms depending on the changes you’re making.

Send your completed forms, a copy of your resolution if needed and your statement of capital to the address on the forms.

Constitution and articles of association

You’ll need agreement from your shareholders before changing your company’s articles of association - the rules about how your company is run.

This can include changes to your company’s ‘objects’ - what your company does as a business.

When you must change your constitution

You can change your constitution whenever your shareholders agree to the change in a ‘resolution’.

You must also change your constitution if:

a change in the law means your constitution would be illegal

ordered to by the courts or a regulating authority (for example the Charity Commission) tells you to change it

Sending your changes

You must include a copy of both the resolution you passed and the new articles of association when you make any changes to your company’s constitution.

Depending on why you’re making the change you may also need to fill in one of the following:

a statement of company objects if your company is changing the objects in its articles

change of constitution by enactment if your change is because of a change in the law

change of constitution by order of court or other authority if your change has been ordered

Send the copy of the resolution, the copy of your new articles and completed form (if any) to Companies House.

If a special enactment makes the change, you must include a copy of the enactment.

Deadline

You must send:

a copy of the resolution within 15 days of it being agreed

a copy of the amended articles of association within 15 days of them taking effect

any forms (if needed) within 15 days of the changes

Mortgages and loan guarantees

You can use your company’s assets as a security for a loan or overdraft (sometimes known as ‘charges’), for example a mortgage for a property.

You must register details about any company charges with Companies House, including information about property or projects that are being backed by the charge.

You must also register changes to charges you’ve previously registered, for example when a charge’s been paid in part or in full.

You must register charges within 21 days from when they’re set up - you will need a court order to register them later.

Register online

You can use the Companies House online service.

It costs £10 to register online.

Register by post

You can send changes to your charges by post:

Download and fill in the forms you need and send them to the address on the forms.

It costs £13 to register by post.

Companies House will reject your application if it’s wrong or incomplete.

You can register for informal correction if you want Companies House to be able to correct certain types of information required to your form.

Once you’re registered Companies House will contact you if they need more information or for permission to make a correction.


Prepare annual accounts for a private limited company

Overview

Your company’s annual accounts - called ‘statutory accounts’ - are prepared from the company’s financial records at the end of your company’s financial year.

You must always send copies of the statutory accounts to:

all shareholders

people who can go to the company’s general meetings

Companies House

You have different deadlines for sending your accounts to Companies House and your tax return to HMRC, but you may be able send them at the same time.

If your company is small, a micro entity or dormant, you might be able to send simpler (‘abridged’) accounts.

How to put together statutory accounts

Statutory accounts must include:

a ‘balance sheet’, which shows the value of everything the company owns, owes and is owed on the last day of the financial year

a ‘profit and loss account’, which shows the company’s sales, running costs and the profit or loss it has made over the financial year

notes about the accounts

a director’s report (unless you’re a ‘micro-entity’)

You might have to include an auditor’s report - this depends on the size of your company.

The balance sheet must have the name of a director printed on it and must be signed by a director.

Accounting standards

Your statutory accounts must meet either:

International Financial Reporting Standards

New UK Generally Accepted Accounting Practice

Search online to find out more about the standards, or ask your accountant or tax adviser. You can find an accountant accredited in the UK.

Micro-entities, small and dormant companies

You might be able to send simpler (‘abridged’) accounts to Companies House and not need to be audited. This depends on whether your company is dormant or qualifies as a small company or ‘micro-entity’.

You must still send statutory accounts to your members and to HM Revenue and Customs (HMRC) as part of your Company Tax Return if you’re a small company or micro-entity.

Dormant companies

Your company is called ‘dormant’ by Companies House if it’s had no ‘significant’ transactions in the financial year that you’d normally report. Significant transactions do not include:

filing fees paid to Companies House

penalties for late filing of accounts

money paid for shares when the company was incorporated

Dormant companies that qualify as ‘small’ do not need to be audited.

Check if your company is also dormant for Corporation Tax.

Small companies

Your company will be ‘small’ if it has any 2 of the following:

a turnover of £10.2 million or less

£5.1 million or less on its balance sheet

50 employees or less

If your company is small, you can:

use the exemption so your company’s accounts do not need to be audited

choose whether or not to send a copy of the director’s report and profit and loss account to Companies House

send abridged accounts to Companies House

Sending abridged accounts

You can only send abridged accounts if all your company members agree to it.

Abridged accounts must contain a simpler balance sheet, along with any notes. You can also choose to include a simpler profit and loss account and a copy of the director’s report.

Sending abridged accounts means less information about your company will be publicly available from Companies House.

Micro-entities

Micro-entities are very small companies. Your company will be a micro-entity if it has any 2 of the following:

a turnover of £632,000 or less

£316,000 or less on its balance sheet

10 employees or less

If your company is a micro-entity, you can:

prepare simpler accounts that meet statutory minimum requirements

send only your balance sheet with less information to Companies House

benefit from the same exemptions available to small companies

Find out exactly what to include in your accounts depending on your company type, for example micro-entity, small, medium or dormant.

Corrections and amendments

You must send amended accounts to Companies House on paper.

Amended or corrected accounts must be for the same period as the original accounts.

You must clearly say in your new accounts that they:

replace the original accounts

are now the statutory accounts

are prepared as they were at the date of the original accounts

Write “amended” on the front so that Companies House know your accounts are not duplicates.

Your original accounts will remain on file at Companies House.

If you only want to amend one part of your accounts, you need to send a note saying what’s been changed. The note must be signed by a director and filed with a copy of the original accounts.

Penalties for late filing

You’ll have to pay penalties if you do not file your accounts with Companies House by the deadline.

Time after the deadline | Penalty (for private limited companies)

Up to 1 month | £150

1 to 3 months | £375

3 to 6 months | £750

More than 6 months | £1,500

Penalties for public limited companies are different.

You’ll automatically receive a penalty notice if your accounts are filed after the deadline.

The penalty is doubled if your accounts are late 2 years in a row.

You can be fined and your company struck off the register if you do not send Companies House your accounts or confirmation statement.

Appeal against a late filing penalty

If you want to appeal a penalty you must:

give a specific reason for not filing your accounts on time

include all relevant details, such as dates and times

prove the circumstances were out of your control, for example a fire destroyed your records a few days before your accounts were due

If you need help with your appeal because you have a disability or a health condition, you can contact Companies House.

Your appeal is likely to be unsuccessful if it’s because:

these were your first accounts

your company is dormant

your company is a charity or a flat management company

you cannot afford to pay

another director is responsible for filing the accounts

it was your accountant’s (or anybody else’s) fault

you did not know when or how to file your accounts

your accounts were delayed or lost in the post

the directors live or were travelling overseas

You can send a letter to the address on the front page of the penalty
invoice, or send an email including the penalty reference.

You’ll get a response within 20 working days and
the penalty will not be collected while your appeal is being
considered.

Challenging an unsuccessful appeal

If your appeal is rejected and you have additional information to support your case, you can write to the senior casework manager in the Late Filing Penalties Department at the Companies House office that deals with your account.

If your appeal to the senior casework manager is unsuccessful, you can write to the independent adjudicators, and ask them to review your case.

If your appeal to the independent adjudicator is unsuccessful, you can submit a final application to the Registrar of Companies at the office that deals with your account.

You must follow this process, otherwise the registrar will not review your appeal.

Find out more about late penalty appeals in different situations.


Running a limited company

Directors' responsibilities

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 hire 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.

You may be fined, prosecuted or disqualified if you do not meet your responsibilities as a director.

Contact your professional adviser or trade association to find out more.

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 changes you must report

You must report certain changes to Companies House.

Changing your company’s registered office address

You must tell Companies House if you want to change your company’s registered office address. If the change is approved, they will tell HM Revenue and Customs (HMRC).

Your company’s new registered office address must be in the same part of the UK that the company was registered (incorporated).

For example, if your company was registered in England and Wales, the new registered office address must be in England or Wales.

Your address will not officially change until Companies House has registered it.

Other changes you must report

You must tell HMRC if:

your business’ contact details change - for example, your name, gender, business name or your personal or trading address

you appoint an accountant or tax adviser

You must tell Companies House within 14 days if you make changes to:

the address where you keep your records, and which records you keep there

directors or their personal details, like their address

‘people with significant control’ (PSC), or their personal details like a new address

company secretaries (appointing a new one or ending an existing one’s appointment)

You must tell Companies House within a month if you issue more shares in your company.

How to report changes to Companies House

You can:

use the Companies House online service

fill in and send paper forms

Changes that shareholders must approve

You may need to get shareholders to vote on the decision if you want to:

change the company name

remove a director

change the company’s articles of association

This is called ‘passing a resolution’. Most resolutions will need a majority to agree (called an ‘ordinary resolution’). Some might require a 75% majority (called a ‘special resolution’).

Companies House has more details about the types of changes and resolutions you must report to them.

Your new company name will not take effect until it’s registered by Companies House - they’ll tell you when this happens.

Shareholder voting

When you’re working out whether you have a majority, count the number of shares that give the owner the right to vote, rather than the number of shareholders.

You do not necessarily need to have a meeting of shareholders to pass a resolution. If the right amount of shareholders have told you they agree, you can confirm the resolution in writing. But you must write to all shareholders letting them know about the decision.

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, including grants and payments from coronavirus support schemes

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

Confirmation statement (annual return)

You need to check that the information Companies House has about your company is correct every year. This is called a confirmation statement (previously an annual return).

Check your company’s details

You need to check the following:

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)

Check the Companies House register.

Send your confirmation statement

Send your confirmation statement online or by post. It costs £13 to file your confirmation statement online, and £40 by post.

If you need to report changes

You can report changes to your statement of capital, shareholder information and SIC codes at the same time.

You cannot use the confirmation statement to report changes to:

your company’s officers

the registered office address

the address where you keep your records

people with significant control

You must file those changes separately with Companies House.

When it’s due

Your confirmation statement is due usually a year after either:

the date your company incorporated

the date you filed your last annual return or confirmation statement

You can file your confirmation statement up to 14 days after the due date.

Sign up to get an email reminder when your confirmation statement is due.

You can be fined up to £5,000 and your company may be struck off if you do not send your confirmation statement.

Signs, stationery and promotional material

Signs

You must display a sign showing your company name at your registered company address and wherever your business operates. If you’re running your business from home, you do not need to display a sign there.

The sign must be easy to read and to see at any time, not just when you’re open.

Stationery and promotional material

You must include your company’s name on all company documents, publicity and letters.

On business letters, order forms and websites, you must show:

the company’s registered number

its registered office address

where the company is registered (England and Wales, Scotland or Northern Ireland)

the fact that it’s a limited company (usually by spelling out the company’s full name including ‘Limited’ or ‘Ltd’)

If you want to include directors’ names, you must list all of them.

If you want to show your company’s share capital (how much the shares were worth when you issued them), you must say how much is ‘paid up’ (owned by shareholders).

There are different rules for what you need to include on invoices.


Strike off your limited company from the Companies Register

Overview

You can close down your limited company 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

hasn’t changed names in the last 3 months

isn’t threatened with liquidation

has no agreements with creditors, eg a Company Voluntary Arrangement (CVA)

If your company doesn’t meet these conditions, you’ll have to voluntarily liquidate your company instead.

When you apply to ‘strike off’ your company, you have certain responsibilities to close down your business properly.

Close down your company

Before applying to strike off your limited company, you must close it down legally. This involves:

announcing your plans to interested parties and HM Revenue and Customs (HMRC)

making sure your employees are treated according to the rules

dealing with your business assets and accounts

Who you must tell

Fill in an application to strike off and send a copy within 7 days to anyone who could be affected. This includes:

members (usually the shareholders)

creditors

employees

managers or trustees of any employee pension fund

any directors who didn’t sign the application form

If you don’t follow the rules on who you must tell, you can face a fine and possible prosecution.

Employees

If your company employs staff, you must:

follow the rules if you make staff redundant

pay their final wages or salary

PAYE and National Insurance (NI)

You’ll need to tell HMRC that your company has stopped employing people.

Business assets

You should make sure that any business assets are shared among the shareholders before the company is struck off.

Anything that’s left will go to the Crown - you’ll have to restore the company to get anything back.

Final accounts

You must send final statutory accounts and a Company Tax Return to HMRC.

You don’t have to file final accounts with Companies House.

Prepare your final accounts and company tax return.

File your accounts and company tax return, stating that these are the final trading accounts and that the company will soon be dissolved.

Pay all Corporation Tax and any other outstanding tax liabilities.

If you’ve made a loss in your final year of trading, you might be able to offset the tax against profits from previous years - this is known as ‘terminal loss relief’. You can claim this on your final tax return.

Capital Gains Tax on personal profits

If you take assets out of the company before it’s struck off, you might have to pay Capital Gains Tax on the amount.

You might be able to get tax relief on this through Entrepreneurs’ Relief.

You will work this out on your personal Self Assessment tax return.

If the amount is worth more than £25,000, it will be treated as income and you’ll have to pay Income Tax on it.

Keeping records

You must keep business documents for 7 years after the company is struck off, eg bank statements, invoices and receipts.

If the company employed people, you must keep copies of its employers’ liability insurance policy and schedule for 40 years from the date the company was dissolved.

Apply to strike off

To apply to strike off your limited company, you must send Companies House form DS01.

The form must be signed by a majority of the company’s directors.

You should deal with any of the assets of the company before applying, eg close any bank accounts and transfer any domain names.

When your company is dissolved, all the remaining assets will pass to the Crown (including any bank balances).

It costs £10 to strike off a company. You can’t pay using a cheque from an account that belongs to the company you’re striking off.

It is an offence to make a dishonest application - you can face a fine and possible prosecution.

What happens next

You’ll get a letter from Companies House to let you know if you’ve filled in the form correctly. If you have, your request for the company to be struck off will be published as a notice in your local Gazette.

If nobody objects, the company will be struck off the register once the 2 months mentioned in the notice has passed.

A second notice will be published in the Gazette - this will mean the company won’t legally exist anymore (it will have been ‘dissolved’).

More information

Read more guidance on striking off your company.

Withdraw your application

You must withdraw your application if your company is no longer eligible to be struck off, eg it is trading or has become insolvent.

You can withdraw your application if you change your mind. You can only do this if your company is still on the Companies Register.

Only one director needs to sign the withdrawal form.

Apply online

You can withdraw your application using the Companies House online service.

Apply by post

Fill in form DS02 and send it to the address on the form.


The Queen's Awards for Enterprise

About the awards

The Queen’s Awards for Enterprise are for outstanding achievement by UK businesses in the categories of:

innovation

international trade

sustainable development

promoting opportunity through social mobility

Find out if your business is eligible.

What happens if your company wins

If you win you’ll be:

invited to a Royal reception

presented with the award at your company by one of The Queen’s representatives, a Lord-Lieutenant

able to fly The Queen’s Awards flag at your main office, and use the emblem on your marketing materials (for example, on your packaging, advertisements, stationery and website)

given a Grant of Appointment (an official certificate) and a commemorative crystal trophy

The awards are valid for 5 years.

Winners have reported benefiting from worldwide recognition, increased commercial value, greater press coverage and a boost to staff morale.

Find out when winners are announced.

Previous winners

View details of previous Queen’s Awards winners.

Eligibility

To apply for the Queen’s Award for Enterprise your organisation must:

be based in the UK (including the Channel Islands and the Isle of Man)

file its Company Tax Returns with HM Revenue and Customs (HMRC)

be a self-contained enterprise that markets its own products or services and is under its own management

have at least 2 full-time UK employees or part-time equivalents

demonstrate strong corporate social responsibility

Your organisation can be a business or non-profit.

Each of the award categories has additional entry criteria.

International Trade

To apply for the International Trade award, you must also:

have made a minimum of £100,000 in overseas sales in the first year of your entry and show year-on-year growth

prove that your organisation has achieved outstanding growth in overseas earnings relative to your business size and sector

prove steep year-on-year growth (without dips) in overseas sales over 3 years - or substantial year-on-year growth (without dips) over 6 years

Innovation

To apply for the Innovation award, you must also:

have an innovation that has not been sold before

have had your innovation available on the market for at least 2 years

have recovered all the investments made in your innovation or show that the innovation will recover its full costs in future

show outstanding commercial success as a result of innovation over 2 years - or continuous commercial success over 5 years

Your innovation should be in one of the following categories:

invention, design or production of goods

performance of services

marketing and distribution

after-sale support of goods or services

Sustainable Development

To apply for the Sustainable Development award, you must also:

show how you have achieved outstanding sustainable development for more than 2 years

provide evidence of the benefits or positive outcomes of your actions or interventions

Promoting Opportunity through social mobility

To apply for this award, your organisation must also have supported people from disadvantaged backgrounds in improving their job skills and their chances of finding work.

This includes doing one or more of the following, for at least 2 years:

providing work experience or careers advice

mentoring

offering interview and job-related training

making sure your recruitment process is open to everyone

You’ll need to prove the benefits for:

the people you’ve supported

your organisation

your employees

the wider community

Apply

The Queen’s Awards for Enterprise are free to enter. You can apply for more than one award.

You’ll need to:

create an account and register your details

answer questions about your eligibility - this should take less than 15 minutes

submit your application by midday on 8 September 2021

Apply now

Queen’s Awards Helpline

Contact the Queen’s Awards Helpline if you need help.

After you've applied

2020 awards

Winners have been announced in the London Gazette. The date of the royal reception is to be confirmed.

2021 awards

Time | Step

1 May 2021 | New application period opens for 2021 awards

Midday 8 September 2021 | Application period closes

October 2021 | Shortlisted organisations notified

November 2021 | Shortlisted organisations asked to provide verified commercial figures

April 2022 | Winning organisations notified

April 2022 | Unsuccessful organisations receive feedback on their applications

21 April 2022 | Winners officially announced in the London Gazette

To be confirmed | Representatives from the winning organisations invited to attend a royal reception


Expenses and benefits for employers

Overview

If you’re an employer and provide expenses or benefits to employees or directors, you might need to tell HM Revenue and Customs (HMRC) and pay tax and National Insurance on them.

Examples of expenses and benefits include:

company cars

health insurance

travel and entertainment expenses

childcare

There are different rules for what you have to report and pay depending on the type of expense or benefit that you provide.

Reporting and paying

At the end of the tax year you’ll usually need to submit a P11D form to HM Revenue and Customs (HMRC) for each employee you’ve provided with expenses or benefits.

You’ll also need to submit a P11D(b) form if:

you’ve submitted any P11D forms

you’ve paid employees’ expenses or benefits through your payroll

HMRC have asked you to - either by sending you a form or an email

Your P11D(b) tells HMRC how much Class 1A National Insurance you need to pay on all the expenses and benefits you’ve provided.

If HMRC have asked you to submit a P11D(b), you can tell them you do not owe Class 1A National Insurance by completing a declaration.

Paying tax on benefits through your payroll

You can deduct and pay tax on most employee expenses through your payroll (sometimes called ‘payrolling’) as long as you’ve registered with HMRC before the start of the tax year (6 April).

You do not need to submit a P11D form for an employee if you’re paying tax on all their benefits through your payroll.

You’ll still need to submit a P11D(b) form so you can pay any Class 1A National Insurance you owe.

What to report

Each expense or benefit is calculated differently. Find the type of expense or benefit you’ve provided to see what you’ll need to report and pay.

For ‘minor’ expenses or benefits, you might be able to make a one-off payment, known as a PAYE Settlement Agreement.

How to report

You can use any of the following methods:

commercial payroll software

HMRC’s PAYE Online service

HMRC’s Online End of Year Expenses and Benefits service

You can also download and fill in forms P11D and P11D(b) and send them to the P11D Support Team.

Correct an error

If you’re correcting a P11D form include all the benefits and expenses for the tax year, not just the ones you want to change.

If you’re correcting a P11D(b) form include the total amount of Class 1A National Insurance you need to pay, not the difference from your previous version.

You must submit a paper form, even if you originally submitted online.

The forms will show the most recent tax year. Write a different tax year on the form if you need to report for a different year. You must write:

that you’re using the form to correct an error made in a different year to the one printed on the form

the tax year you’re making the amendment for

Where to send forms

Send new or corrected paper forms to:

Penalties

You may be charged a penalty if you carelessly or deliberately give inaccurate information in your tax return that results in you:

not paying enough tax

over-claiming tax reliefs

Deadlines

What you need to do | Deadline

Submit your P11D forms online to HMRC | 6 July following the end of the tax year

Give your employees a copy of the information on your forms | 6 July

Tell HMRC the total amount of Class 1A National Insurance you owe on form P11D(b) | 6 July

Pay any Class 1A National Insurance owed on expenses or benefits | Must reach HMRC by 22 July (19 July if you pay by cheque)

If you have a PAYE Settlement Agreement pay tax and Class 1B National Insurance | Must reach HMRC by 22 October (19 October if you pay by cheque)

Pay any PAYE tax or Class 1 National Insurance owed on expenses or benefits | Pay monthly through payroll

You’ll get a penalty of £100 per 50 employees for each month or part month your P11D(b) is late. You’ll also be charged penalties and interest if you’re late paying HMRC.

Record keeping

You must keep a record of all expenses and benefits you provide to your employees.

Your records need to show that you’ve reported accurately and your end-of-year forms are correct.

HM Revenue and Customs (HMRC) may ask to see evidence of how you accounted for each expense or benefit at the end of the tax year.

What you should keep

You’ll need to keep a record of:

the date and details of every expense or benefit you provide

any information needed to work out the amounts you put on your end-of-year forms

any payment your employee contributes to an expense or benefit

You should also keep any correspondence you have with HMRC.

Records must be kept for 3 years from the end of the tax year they relate to.

Exemptions and dispensations

You don’t have to report some routine employee expenses to HM Revenue and Customs (HMRC). This is called an ‘exemption’.

Exemptions have replaced dispensations. You can’t apply for a dispensation any more.

Expenses covered by an exemption

You don’t have to report certain business expenses and benefits like:

business travel

phone bills

business entertainment expenses

uniform and tools for work

To qualify for an exemption, you must be either be:

paying a flat rate to your employee as part of their earnings - this must be either a benchmark rate or a special (‘bespoke’) rate approved by HMRC

paying back the employee’s actual costs

You must deduct and pay tax and National Insurance on all other expenses and benefits you give to your employees, and report them to HMRC as normal.

Apply for an exemption

You don’t need to apply for an exemption if you’re paying HMRC’s benchmark rates for allowable expenses.

You only need to apply for an exemption if you want to pay bespoke rates to your employees.

You’ll have to give HMRC evidence that the rates you’re suggesting are based on your employees’ actual expenses.

If you had a dispensation from HMRC

Your dispensation won’t apply after 5 April 2016, but the expenses covered by it should also be covered by the exemption.

If you agreed bespoke rates with HMRC between 6 April 2011 and 5 April 2016 as part of your dispensation, you can apply to carry on using them.

You can only use the bespoke rates for up to 5 years from the date they were agreed.

Checking expenses

You must have a system in place to check payments you make at benchmark or bespoke rates.

Your employees aren’t allowed to check their own expenses, so someone else within your company needs to do this to make sure they’re legitimate.

Tell your employees to keep proof of their expenses, for example receipts or bills, in case you need to check them.