There are a limited range of circumstances when a company can request to be removed from the register (known as being struck off). For example, a voluntary strike off can be requested by a dormant or non-trading company.
You can object to a limited company’s application to be struck off the companies register if you’re a shareholder or other interested party, such as a creditor, and have a reason to stop the application, for example:
When a company has applied to be struck off, it is required to post a notice in the Gazette. You can only raise an objection (to Companies House) after this notice has been published.
You will need to provide evidence to support your objection, for example invoices showing the company is still trading or owes a debt.
Companies House must receive your objection at least 2 weeks before the notice expiry date (2 months after the date of publication). Companies House will let you know if your objection is successful and will usually set a time limit during which the company cannot be struck off.
An overseas company must register with Companies House if they want to set up a place of business or branch in the UK. Generally, this would be if the overseas company had a physical presence in the UK through which it carries on business.
If an overseas company does not have a physical presence in the UK, they are not usually required to register with Companies House. For example, an independent agent who conducts business on behalf of an overseas company is not considered to have a physical presence in the UK, neither is an occasional location such as a hotel where a director of an overseas company may conduct business during periodic visits to the UK.
If an overseas company is required to register, then they must submit a completed OS IN01form and pay the standard registration fee of £20 to Companies House. If the company is registering its first UK establishment, it must also send Companies House a certified copy of the company’s constitutional documents and a copy of the company’s latest set of accounts (with a certified translation in English if prepared in another language).
The overseas company can be registered using its corporate name (its name under the law of the country of incorporation), or an alternative name under which it proposes to carry on business in the UK.
An overdrawn Director’s Loan Account is created when a director (or other close family members) 'borrows' money from their company. Many companies, particularly 'close' private companies, pay the personal expenses of directors using company funds. Where these payments do not form part of a director’s remuneration, they are usually posted to the Director’s Loan Account (DLA).
The DLA can represent cash drawn by a director as well as other drawings by a director (including personal bills paid by the company). Whilst it is quite common for small company accounts to show an overdrawn position on a DLA, this can create unwelcome tax and NIC consequences for both the company and the director. The rules are further complicated if the loan is for more than £10,000 and the loan must be reported on the director’s personal Self-Assessment tax return. There are also further Income Tax costs if the loan is written off or 'released' (not repaid) by the company.
Where certain DLA's are not paid off within nine months and one day of the company's year-end, there is an additional Corporation Tax (CT) bill of 32.5% of the outstanding amount. In most cases, this is not a permanent loss of revenue for the company as a claim can be made to have this CT refunded (but not interest) when the loan is paid back to the company. The claim to have the tax refunded needs to be made within 4 years after the end of the year in which the participator's loan was repaid.
The CT, Income Tax and National Insurance impacts of using a DLA must be carefully considered to ascertain if this is an efficient way for a director to ‘borrow’ money from their company.
If you own a business as a sole trader or in partnership, a Capital Gain will arise if your business is transferred into a company structure. The gain will be assessed by reference to the market value of the business assets, including goodwill, at the date of transfer. This could give rise to a chargeable gain based broadly on the difference between the market value of the assets and their original cost.
In most cases, the incorporation of the business will be completed so that incorporation relief can be claimed. The claim for incorporation relief should defer any tax until you sell your shares in the business.
In order to qualify for incorporation relief, all your business assets other than cash must be transferred as a going concern, wholly or partly in exchange for shares in the new company.
It is important to note that where the necessary conditions are met, incorporation relief is given automatically and there is no need to make a claim. The relief works by reducing the base cost of the new assets by a proportion of the gain arising from the disposal of the old assets.
Although the relief is automatic, it is possible to make an election in writing for incorporation relief not to apply. An election must be made before the second anniversary of 31 January next, following the tax year in which the transfer took place e.g. an election in respect of a transfer made in the current 2019-20 tax year must be made by 31 January 2023. The election deadline is reduced by one year if the shares are disposed of in the year following that in which the business was incorporated.
Incorporation Relief is just one possible strategy that can be used to minimise tax liabilities if you incorporate your business. However, there are other planning options. If you are considering incorporation, be sure to take professional advice. We can help.
The Inheritance Tax residence nil-rate band (RNRB) came into effect on 6 April 2017. The RNRB is a transferable allowance for married couples and civil partners (per person) when their main residence is passed down to a direct descendent such as children or grandchildren after their death. The RNRB effectively increases your existing £325,000 inheritance tax nil-rate band.
The RNRB is being introduced in stages, the threshold is currently £150,000 and will increase to £175,000 in 2020-21. After this, the limit is set to increase in line with the Consumer Prices Index. Any unused portion of the RNRB can be transferred to a surviving spouse or partner in a similar way to the existing NRB.
The allowance is available to the deceased person's children or grandchildren. Taken together with the current Inheritance Tax limit of £325,000 this means that by 2020-21, parents will be able to pass on property worth up to £1 million free of Inheritance Tax to their direct descendants.
There is a tapering of the RNRB for estates worth more than £2 million even where the family home is left to direct descendants. The additional threshold will be reduced by £1 for every £2 that the estate is worth more than the £2 million taper threshold. This can result in the full amount of the RNRB being tapered away.
If your estate exceeds these extended nil-rate band limits, you should consider a formal Inheritance Tax planning exercise. There are ways to mitigate liabilities and we can advise.
There are special rules in place which limit your options to change your company’s year-end date. A company’s year-end date is also known as its ‘accounting reference date’ and is historically set by reference to the date the company was incorporated. Under certain circumstances it is possible to make a change to the year-end.
As a general rule, you can only change the year end for the current financial year or the one immediately before it. Making a change to a year-end date will also change the deadline for filing accounts (except during a new company’s first financial year).
There is no limit to the amount of times you can shorten a year-end date, but you can only extend the period to a maximum of 18 months once in every five years. The financial year can be extended more often under limited circumstances. For example, if the company has been placed in administration.
A request for a change to an accounting reference date can be made online using the Companies House online service or by using a postal version of the Change your company accounting reference date (AA01) form. No change can be made to a period for which accounts are overdue.
There is no overriding reason for using one date over another, but there are a number of factors to consider. The most common year-end dates are 31 December (to coincide with the end of the calendar year) or 31 March (to coincide with the end of the tax year).
National Insurance credits can help qualifying applicants to fill gaps in their National Insurance record. This can assist taxpayers to build the amount of qualifying years of National Insurance contributions, which can increase the amount of benefits a person is entitled to, such as the State Pension.
National Insurance credits are available in certain situations when people are not working and, therefore, not paying National Insurance. For example, credits may be available to those looking for work, who are ill, disabled or on sick pay, on maternity or paternity leave, caring for someone or on jury service.
Depending on the circumstances, National Insurance credits may be applied automatically or an application for credits may be required. There are two types of National Insurance credits available, either Class 1 or Class 3. Class 3 credits count towards the State Pension and certain bereavement benefits whilst Class 1 covers these as well as other benefits such as Jobseeker’s Allowance.
There are usually no National Insurance credits available to the self-employed that need to pay Class 2 National Insurance or for older married women who chose to pay a reduced rate of National Insurance (pre-April 1977).
There is usually no Capital Gains Tax (CGT) to be paid on the transfer of assets to a spouse or civil partner. There is, however, still a disposal that has taken place for CGT purposes effectively at no gain or loss on the date of the transfer. When the asset ultimately comes to be sold, the gain or loss will be calculated from when the asset was first owned by the original spouse or civil partner.
There are a few exceptions that couples should be aware of where the relief does not apply.
This mainly relates to the use of goods which are sold on by the transferee’s business and for couples that were separated and not living together for the entire tax year, when the assets were transferred. Spouses or civil partners that lived together at any point in the tax year when the assets were transferred can still benefit from these rules. If a transfer did not qualify then the asset must be retrospectively valued at the date of the transfer and the transferor is liable for any gain or loss.
There are similar rules for assets that are gifted to charities. However, CGT may be due where an asset is sold to a charity for more than its cost and less than the market value. The gain in this case would be calculated based on what the charity paid rather than the market value of the asset.
The rules for individuals providing services to the public sector via an intermediary such as a Personal Service Company (PSC), changed from April 2017. The new rules shifted the responsibility for deciding whether the intermediaries’ legislation applies, known as IR35, from the intermediary to the public sector receiving the service.
In the 2017 Autumn Budget, the Government announced plans to extend these rules to off-payroll working in the private sector. The new rules come into effect from 6 April 2020. The changes are expected to raise over £1.1bn for the public purse in 2020-21. From this date, all medium and large-sized clients will be responsible for deciding the employment status of workers.
The changes mainly apply to businesses with an annual turnover of more than £10.2 million (known as the simplified test). If the simplified test does not apply, then the rules still apply if the private sector client meets 2 or more of the following conditions:
If you meet the conditions above, you must start applying the rules when the changes come into force on 6 April 2020.
One of the most often used and valuable of the Capital Gains Tax (CGT) exemptions is Private Residence Relief, which usually exempts any profit made on the sale of a family home.
Consequently, there is no CGT on a property disposal that has been used solely as the main family residence. An investment property, which has never been used as a family residence, will not qualify for PRR.
However, an interesting counter point occurs if and when you make a loss on the sale of your home. You will not be entitled to any CGT loss relief as you would have qualified for PRR if the property was sold at a profit.
Other planning points
If you would have qualified for partial relief, part of your loss will not be allowable, and that part should be calculated in the same way as you would have calculated the partial relief if you had made a gain.
The sale of a second home such as a holiday home or a property, that was bought as an investment and rented out either in the UK or overseas, may be subject to CGT. Conversely, any loss incurred on the sale of such a property is likely to be an allowable loss and can be used to reduce any taxable gains subject to CGT.
If you are contemplating the sale of a property that has had mixed use as your home and let for periods of time, please call if you need help estimating any CGT that may be payable.