UK Company Annual Filings and Disclosure

COMPANY REGISTERED IN ENGLAND, BRITISH INCORPORATED COMPANIES. FILING ANNUAL RETURNS - ANNUAL FILING REQUIREMENTS. ROLE OF THE COMPANY SECRETARY

Do you need to fill in a tax return? Guidance on Completing the Annual Return - every company is required by law to complete a yearly annual return which is provided by Companies House on Form 363s. Completing the annual return Form 363a - this is an alternative to the shuttle annual return. All details on Form 363a will just verify the information Companies House already holds about your company. If you have relatively straightforward tax affairs and already pay tax through PAYE (Pay As You Earn) you probably won't need to complete a tax return. But if you have more complicated tax affairs - or income from several sources - you may need to complete one. You may need to fill in a tax return if you have 'capital gains' (profits from the sale of certain assets) worth more than the annual exempt amount (AEA). For the tax year 2004-2005 this is £8,200 (£8,500 for 2005-2006). You may also need to complete one if you've disposed of (e.g. sold or given away) chargeable assets worth over four times the AEA. Failure to return this form correctly completed by the due date can result in the company being struck off the register. We offer a service whereby we check the information held at Companies House against your records then complete and file the form on your behalf for a charge of £90.00 including the Companies House filing fee.

How to get a tax return? If you've not received a tax return but think you should complete one contact your Tax Office. Your employer or pension provider will have details of this, or you can search online. You can ask for a tax return at any time - for example, if you want to claim a particular tax relief or exemption. Depending on your circumstances you may be sent a short four-page return, or the full return. You can complete the full tax return online.

If you receive a tax return do you have to complete it? Yes - even if you pay all your tax through PAYE. A tax return is sometimes required for other reasons, for example to check if the correct tax has been paid overall. So if you are sent a tax return, you must fill it in and send it back even if you believe that you have no extra tax to pay.

The role of the company secretary. The legislation surrounding companies often appears complicated and may at times be confusing for those involved. The company secretary plays an important role in ensuring that a company and its directors both comply with company law. The role might be described best as that of chief administrator! Do all companies need a company secretary? Yes, at present, company law requires every limited company to have a formally appointed company secretary. In fact, all private limited companies must have at least one director along with a company secretary and where the company has a sole director, that director cannot also be the company secretary. Where there are two or more directors, one may be appointed as the secretary. In all companies, whether public or private, the secretary performs an important role in ensuring that the company meets statutory requirements.

Important Links

Every company in the UK is required by law to have a company secretary. Company secretaries also work in many other types of organisations, such as charities, trade and professional associations, universities, local authorities and the health service. At the time of your company formation or at any time thereafter Coddan can be appointed as your company nominee secretary if required. Our annual fees for company secretary appointment are £49.95. This covers our appointment as secretary. Our annual fee includes the cost of processing the company's Annual Return each year. If you would like us to undertake specific company secretary services then we will quote you the likely fees either on an annual or task-by-task basis.

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For public companies these may be onerous tasks requiring specialist up to date knowledge of company law. As such, public companies are required to appoint a suitably qualified company secretary. This is not necessary for private companies.

When and how should the company secretary be appointed? A company secretary is appointed when a company is first incorporated. Any subsequent changes to the particulars of the company directors or secretary, for example, changes in their name or address, must be notified to Companies House using a standard form - 288c. When a director or company secretary resigns, form 288b must be completed and sent to Companies House. When a new director or secretary is appointed, form 288a should be used. (Forms 288a (to appoint the directors and secretary), Form 288b, Form 288c, or Form 287). If you would like to discuss any of the issues raised above please do contact us. We are able to provide comprehensive assistance with company secretarial matters such as:

The maintenance and safekeeping of the company registers;
The processing and filing of minutes;
The preparation and filing of resolutions;
The completion and filing of statutory forms;
The filing of the annual accounts and annual return;
Registered office facility;
Company searches;
Comprehensive form filling and filing service.

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CORPORATE TAX IN THE UK

A company resident in the UK is taxed on its worldwide profits, subject to relief under double taxation agreements or unilateral relief for tax suffered overseas. A company non-resident in the UK but carrying on business in the UK through a branch or agency is liable to UK corporation tax on the net profits derived there from, including capital gains arising on disposal of assets situated in the UK used in carrying on that business.

A company not resident in the United Kingdom is liable in any event to income tax at 22% on its other UK source income; although interest on certain government securities is exempt and, by concession, tax will not normally be charged on bank and building society interest. Thus, if such a company trades in the UK, but not through a branch or agency, it is liable to UK income tax on its net profits from such trading. A company is generally resident in the UK if it is managed and controlled in the UK (or, if it is incorporated in the UK, wherever it is managed and controlled, unless a "tie-breaker" clause in a double taxation treaty determines otherwise).

Rates of tax. The profits (including capital gains) of a company are subject to corporation tax at 30% except that, where profits of a UK resident company are £300,000 (a year) or less "small companies relief" reduces the rate to 20%; with marginal relief where profits are £300,001 or more but less than £1,500,000. The relief is reduced if there are active associated companies (even those not resident in the UK) and is not available to "closely controlled" investment companies. A new starting rate of tax of 10% was introduced for companies with taxable profits of up to £10,000, effective from 1 April 2000. The rate then increases so that profits over £50,000 are taxed at an average rate of 20%.

For accounting periods ending on or after 1 July 1999, a system of self-assessment is introduced and the company tax return will have to include a self-assessment by the company of its corporation tax liability on the basis of the information contained in the return. Corporation tax is due 9 months after the end of the relevant accounting period.

Transfer pricing. Rules may be invoked to substitute arms' length prices for international transactions with overseas associates, which can include - for example - a deemed interest charge on cheap or free credit provided to an overseas associate.

Thin capitalization. Generally, corporation tax relief is due on interest paid by a UK company to a non-resident parent or fellow subsidiary; but where the group relationship is 75% or more, only to the extent that the interest charge does not exceed what would have arisen without the special relationship. Excess interest is disallowed in calculating taxable profits and treated as a distribution of profits.

Overseas tax relief. A UK-resident company is taxable on its worldwide income and gains, but subject to relief given by double taxation treaties. Typically these will give sole taxing privileges to another country in which a UK company trades through a "permanent establishment", to the extent of the profits so derived. Relief is available against UK tax, either by direct credit or by treating the tax as an expense, unilaterally or under treaty, for overseas tax properly chargeable.

Dividends. UK residents are entitled to a tax credit when they receive a dividend from a UK company. Non UK residents are not entitled to a tax credit. They may however be entitled to a tax credit if they are resident in a country with which the UK has a Double Taxation Agreement, and the Agreement provides for payment of the same tax credit as a UK resident would be entitled to receive. In that case, the shareholder is liable to income tax on the total of the dividend and the tax credit, at the rate of tax laid down in the Agreement.

From 6 April 1999, all double taxation agreements that provide for payment of a tax credit on dividends paid by UK companies continue to give that right. However, because the rate of tax credit has been reduced, the amount which the UK is entitled to retain under those agreements will in practice cover the whole of the tax credit. So if a shareholder makes a claim under an agreement where a dividend has been paid on or after 6 April 1999, there will be no balance of tax credit left for the UK Revenue.

Employees. Minimum wage legislation has now been introduced in the United Kingdom. The hourly rate of the national minimum wage is £3.20 for people aged 18-21 inclusive and £3.70 for people aged 22 and over. The Government has announced increases to £3.50 and £4.10 respectively in October 2001.Administrative requirements entitle all employees to receive a written statement of their terms and conditions of employment. Under the European Community Working Time Directive, employees must not be asked to work in excess of 48 hours per week unless they consent to signing an opt-out agreement. There are also rules for obligatory holidays for maternity and for statutory sick pay.

Dismissals - there are statutory provisions for compensation in the event of unfair dismissal or redundancy. Businesses which take on employees must register with the Inland Revenue for the purposes of PAYE (Pay As You Earn), the UK system whereby the employer is obliged to deduct and account to the Inland Revenue for the tax payable to the Inland Revenue by the employee.

Work Permits. No work permit is required for European Union citizens and in certain circumstances Commonwealth nationals who wish to come and work in the United Kingdom. However non-EU citizens must obtain a work permit before coming to the United Kingdom to take up work.

Directors. The law on the duties of directors is too broad a subject to cover in this summary. However certain elements can be alluded to here, namely that a director has a fiduciary duty to the company to act in its best interests; a director must not profit personally from his position in the company; and the standard of skill and care required of a director is that of a reasonably diligent director in general. Directors are not normally liable for the debts of the company. However there are specific instances where they can be made liable for such debts, if they manage the affairs of the company improperly or in particular, if they are judged to have been involved in "wrongful trading", which broadly speaking means that they have continued to allow the company to trade at a time when they were (or should have been) aware that the company had no reasonable prospect of avoiding insolvent liquidation.

OTHER TAXES

Import duties. Import duties are normally levied by the UK at the time of importation of goods originating outside the European Community. They are generally a percentage of the value, but are sometimes based on quantity.

Excise duties. Excise duties are imposed by the UK on alcohol, tobacco products and petrol; and also, as an annual amount, on motor vehicles.

Local taxes. Local authorities level a "council tax", based on house values and number of occupiers, on residential property and also collect "rates" (a form of property tax) on business property in their area.

Stamp duties. No stamp duty is payable on gifts. Transfers of shares carry duty of £5.00 for purchases of £1,000 or under and up to 0.5% of the total consideration for transactions over £10,000. Transfers of land carry duty at 1% of consideration between £60,001 - £250,000. Between £250,001 and £500,000 the rate of duty is at 3% and above £500,001 the rate of duty is 4%. No stamp duty is payable on transfers of land where the consideration does not exceed £60,000. The stamp duty regime on purchases of land also applies to transfers of goodwill. However stamp duty on intellectual property was abolished from 28 March 2000.

Registration Requirements. Mention has been made above of the requirements for a company to register with Companies House for employers to register for PAYE with the Inland Revenue, and for a company which exceeds the VAT turnover limit to register for value added tax. Other registrations which may be necessary are those for: a company providing services in relation to "investment business" under the Financial Services Act 1986"; insurance companies; a consumer protection agency; data protection (in respect of personal information retained on computer); and home office registration for foreigners seeking resident status.

Continuing Administrative Requirements. Companies operating in the financial services or banking fields, and charities, have to meet strict requirements and be registered with a regulatory body. All companies must keep accounts and records showing their true position at all times. Businesses which have employees must comply with the requirements of the PAYE (Pay As You Earn) tax system, keeping records and accounting to the Inland Revenue for tax and national insurance, normally monthly.

A company has to publish annual audited financial statements in the specified format. There are exemptions for companies with a low amount of turnover and gross assets. Special rules apply to foreign holding companies. Accounting statements must be produced in English (or Welsh in the case of a Welsh company) but may be stated in any currency, including ECUs. They must be signed by at least one director and sent to all shareholders.

UK PROPERTY REGIME

Introduction. There are two types of legal land tenure in the United Kingdom: freehold and leasehold. A freehold interest is a right to ownership of land that lasts forever. It is normally acquired in consideration of the payment of a capital sum. A leasehold interest is a right to an interest in land for a fixed period of time only. Broadly speaking, a lease may be acquired either by payment of a capital sum by the tenant to the landlord, known as a premium, or by the payment of an annual sum or rent by the tenant to the landlord. Often investors prefer to acquire freehold property. There are, however, many major property investments that are held on a leasehold basis. This is particularly true of many of the most important and desirable properties in the City of London as such properties are often held on leases granted for terms of as long as 150 years.

Businesses often prefer the relative flexibility of a leasehold interest. Without having to pay a substantial capital sum, a company can enjoy the financial and operational benefits of a rented property on an industrial estate specifically designed for business purposes.

Professional advice. When acquiring property in the UK, you will need to seek advice from surveyors and solicitors. A surveyor will advise the investor or business occupier on the type of property that should be considered, in particular the location of such property, its condition and its rental and capital value. A solicitor is a lawyer that deals with the legal side of acquiring the property, such as the drafting of necessary documents (e.g. leases) and forms for registration. In addition, solicitors will also advise in relation to the corporate structure involved in making such an investment, (e.g. whether the investment should be direct, via a limited company or through an overseas holding company depending on what would be the most tax effective method of investment for each individual client).

Leaseholds. The UK has very long established systems of landholdings. The leasehold system in the UK can offer flexibility for business. Occupational leases are normally in the form of "institutional" leases (i.e. in a form which institutions such as large insurance companies and pension funds, find acceptable and are willing to grant to occupying tenants). Leases are normally for relatively long periods with upwards only rent reviews at least every 5 years. For investors, this ensures that the rental income cannot fall and is reviewed on the basis of the current open market rental value of the relevant property, and not on the rate of inflation alone.

To allow businesses flexibility (e.g. where a business expands or contracts) tenants will often seek break clauses in leases permitting tenants to terminate leases early. Leases are normally granted on a full repairing and insuring basis. A landlord will thus not usually have to make provision for general upkeep of the property, and the majority of the rent payable can be received as a secure net income.

Matters such as non-payment of rent or other serious breaches of obligations by tenants may lead to forfeiture of the lease, and the risk of this alone will often cause tenants to comply strictly with the terms of the lease. With long leases, a tenant will normally assume obligations to keep the property in good repair, pay for insurance and maintenance and all relevant taxes, to restrict the use of the property to a particular so as not to diminish its value and to return the property to the landlord at the end of the lease in good condition.

Matters to watch out for planning. When looking for premises, businesses need to ensure that the use to which the premises are intended to be put accord with planning control. Your solicitor should check with the local authority to ensure that the proposed use will not be a breach of planning control. Failure to do so could mean that your business could be closed down.

Matters to watch out for environment. There are now strict legal requirements governing the release of emissions into the air, water and land. Specialist advice should be sought to ensure that any process which is intended to be carried out will be in accordance with environmental control. Businesses should also be aware that if their use contaminates land, they could be liable for clean-up costs under the Environmental Protection Act 1990 and Environment Act 1995.

This briefing note is only intended to provide a general commentary and does not deal with the laws of Scotland or Northern Ireland which are different in certain aspects. It is not exhaustive and appropriate advice should be sought in specific circumstances.

WHICH COMPANIES MUST SEND AN ANNUAL RETURN TO COMPANIES HOUSE?

Every United Kingdom limited company must deliver an Annual Return to Companies House within 28 days of its made-up date. A company's director(s) and secretary are responsible for ensuring that the Annual Return: is delivered to Companies House within 28 days after the anniversary of incorporation or the anniversary of the made-up date of the last Annual Return. Gives a true picture of the management structure and capital (if applicable) of the company at the made-up date.

Important Note: It is a criminal offence not to deliver the company's Annual Return within 28 days of the made-up date, for which company secretaries and directors may be prosecuted.

WHAT IS AN ANNUAL RETURN FORM 363?

An Annual Return is a snapshot of certain company information at the made-up date. It is separate from a company's annual accounts. An Annual Return must contain the following information: the name of the company, its registered number, the type of company it is, for example, private or public, the registered office address of the company. The address where certain company registers are kept if not at the registered office. The principal business activities of the company. The name and address of the company secretary. The name, usual residential address, date of birth, nationality and business occupation of all the company's directors. The date to which the annual return is made-up (the made-up date).

And if the company has share capital, the Annual Return must also contain: the nominal value of total issued share capital. The names and addresses of shareholders and the number and type of shares they hold or transfer from other shareholders.

WHAT IS THE MADE-UP DATE?

This is the date at which all the information in an Annual Return must be correct. The made-up date is usually the anniversary of: the incorporation of the company; or the made-up date of the previous Annual Return registered at Companies House.

WHERE DO YOU GET AN ANNUAL RETURN?

Companies House will send an Annual Return to the registered office address of every company about two weeks before the made-up date. This document is pre-printed with company information already held on the public record and most companies use this form to make their Annual Return. This Form is known as the "shuttle" Annual Return (Form 363s).

COMPLETING THE SHUTTLE ANNUAL RETURN FORM 363(s)

Follow the instructions on the covering letter and on the form, and use the form to tell Companies House about any changes to: the company's registered office, the address at which the company's register of members is kept (if applicable). The address at which the company's register of debenture holders (if any) is kept. The principal business activities of the company. The details, for example, change of the usual residential address, of any company secretary or director and if the information has been pre-printed, of any shareholder. The date a company officer resigned. However, do not use the shuttle Annual Return form 363(s) to tell Companies House about: the appointment of a new company officer - use Form 288 (a), any change in a company's total nominal capital. The allotment of new shares by a company - use Form 88 (2).

WHAT INFORMATION DOES COMPANIES HOUSE REQUIRE ABOUT SHARE CAPITAL?

This applies to every company with a share capital. If a company has converted shares into stock, give the corresponding information in relation to that stock, stating the amount of stock instead of the number and nominal value of the shares. For most companies with share capital, the shuttle Annual Return: - Form 363 (s) will include pre-printed information about the company's total issued share capital.

If the information is not pre-printed or if you use Form 363 (a), please state for each class of issued share: the name of the class of each type of share. For example, ordinary or preference shares. The total number of shares issued to shareholders at the made-up date of the return. The total nominal value of issued shares of that class at the date of the return.

NB: The total nominal value of the shares is the total nominal or face value of the shares excluding any premium.

WHEN DO YOU HAVE TO LIST ALL COMPANY MEMBERS?

Whichever type of Annual Return form is used, a company with share capital must provide a "full list" of all its members on: its first Annual Return following incorporation, every third Annual Return after it has provided a full list.

The intervening two Annual Returns need only report changes to shareholder information that have taken place during that year - that is, shares transferred and particulars relating to shareholders who have become members or ceased to be members.

A "full list" Annual Return must contain the following information about a company's shareholders: the name and address of every shareholder of the company at the made-up date. The name and address of every shareholder who has ceased to be a member of the company since the made-up date of the previous Annual Return (or in the case of a first return, since the incorporation of the company). The number of shares of each class held by each member of the company at the made-up date of the Annual Return. The date of registration and the number of shares of each class transferred by each member or past member since the made-up date of the previous Annual Return (or in the case of a first return, since the incorporation of the company).

On a shuttle Annual Return Form 363 (s), Companies House will pre-print the individual shareholder information where the details are available and if a company has 20 or fewer shareholders. Use the space provided alongside the details of each shareholder to make any necessary amendments to the information.

NB: A company may issue additional shares provided that Companies House is or has been notified of the allotment of the shares on Form 88 (2).

SENDING EMPLOYER'S ANNUAL RETURNS. ONLINE FILING FROM APRIL

With more than 500,000 employers, agents and payroll bureaux registered to use our online services, we are pulling out all the stops to make sure that online filing of Employer's Annual Returns (P14 and P35 information) runs smoothly for employers and agents. Most employers file online between 10am and 4pm. They might get a slightly speedier service if they can try to send Returns outside those peak hours. And it will help to avoid the peak filing days, usually 18 and 19 May.

YOUR P35

Employers must not send us a paper P35 if they send their P35 online, even if they get one through the post. If we do get both, and the paper Return is accepted before the online Return, we will treat the Return as being made by paper. This means that large employers (250 or more employees) who must file online will incur the online filing penalty and small employers (fewer than 50 employees) will not get the tax-free incentive.

FILING WITHIN SEVEN DAYS OF 19 MAY

Extra Statutory Concession B46 allows employers up to seven more business days after the Employer's Annual Return filing deadline of 19 May to get their Return to us before we charge a late filing penalty. This Concession is intended to address the situation where a Return is delayed by something beyond the employer's control, such as postal delays, but it also applies to online Returns as well as those sent on paper or by magnetic media. Although online transmissions are much faster than post, they are not always instantaneous.

SENDING RETURNS IN PARTS

Some employers will find that their business circumstances require them to send their Return in separate parts. We must have all the parts of a Return before we can make an incentive payment or prevent penalties. If employers or agents file in parts (for example, send P14s in batches), the further quality checks will be applied to each P14 part separately and then to the whole Return (P14s and P35). Whoever sends in each part will get the same acceptance message saying: 'The EOY Return has been processed and passed full validation', even if there may be more parts to follow. It is important that the acceptance message is not misinterpreted as a successful submission of the whole Return. So whoever is sending the P35 Return part must make sure that every part has been or will be sent in. We recommend that agents tell their clients how many parts they intend to send and when they have been sent. We also recommend that the P35 is sent last.

INVALID NATIONAL INSURANCE NUMBER PREFIXES FOR 2004-05 AND 2005-06

Temporary National Insurance numbers starting with TN must not be used in the National Insurance number field. Returns sent on paper will be sent back if temporary numbers are used. If the actual number is not known, the National Insurance number field must be left empty and the date of birth and gender fields completed. Temporary numbers allocated by software during the year must be removed before the Return is sent. National Insurance number prefix 'PZ' is also not acceptable for 2004-05. National Insurance numbers starting PZ must be removed before the Return is sent.

P35 TAX AVOIDANCE SCHEMES

New rules putting an obligation on promoters and users of certain tax avoidance schemes and arrangements to disclose details to the Inland Revenue were announced on 17 March 2004. Initial plans to add a question about tax avoidance schemes to the P35 from 2006-07 have been deferred while the Inland Revenue evaluates the extent to which employers use tax avoidance schemes.