The Lemon Fool

I am thinking of setting up a new, relatively small UK business and was curious to ask how much paperwork and administration was involved every year in running a limited company i.e. registered with Companies House?

The business won't be very big. It will provide consultancy services to other businesses and should "only" involve about twenty payments going into and another fifteen going out of the business bank account every month.

I am already fed-up with adminstration in other parts of my life and so am concerned that the amount of red tape will keep me tied to my computer on Sunday evenings forevermore doing this and that!

HMRC will soon require quarterly filings, as well as the annual paperwork for them, and then there's calculating the income, every single expenditure, all the VAT etc.

I think for such a small company it'll be more efficient and quicker doing it myself than dealing with an external party - an accountant - all the time.

Very approximately, how many hours every month or year does all the admin with Companies House, HMRC etc. take? I appreciate it varies from business to business.

Your advice would be most welcome! Thank you.

Once you have done the setup, the only extra you have to do for a Ltd company, compared to a self employed business, is filing the accounts with Companies House, completing the Annual Return (that they've recently renamed), producing minutes of annual meeting, dividend certificates - if dividends are done, and CT600 for HMRC.

All in all I think it is about an hour more per year than if I were self employed. Other than the actual AGM where the other director and I have to go for a 2 hour lunch to complete the meeting

Minutes and dividend certificates take longer the 1st year, as you have to create your Word templates. After that physically printing them is the slowest bit.

Slarti

Edit:- I forgot VAT and book keeping as they'd have to be done even if not limited. 2 or 3 hours per quarter, depending on how busy I've been. That is posting all of the purchase invoices into my accounting software, sales being done as and when, extracting the turnover and VAT into a spreadsheet, recalculating, checking and the entering onto HMRC website.

Interesting. Thanks very much for sharing the useful insight.

I was interested in determining how much time it would take versus not starting a business at all (i.e. not being a sole-trader either). Does all the government admin. take 5 hours a week, 10 hours a week etc.?

Everybody advertises everything is easy and simple, until it is actually done. For instance, in my repeated experience HMRC don't even pick up the phone unless you wait at least 30 minutes. I've just looked at the CT600 instruction guide and it is over 70 pages long.

I ran my own ltd company for several years. Other than routine bookkeeping, which is required no matter how you operate...

Creating and registering the company. 10 minutes.
Once you get the details, create online accounts at HMRC and Companies House. 10 mins each.

First annual accounts took me a day. But at the time I had to create them from scratch. Subsequent ones about 2 hours. Per year.
In fact, now, the HMRC website will produce your annual accounts from your tax return, using the figures you have typed in for the latter. And it will directly file the abbreviated accounts at companies house for you. So it shouldn't take you anything like a whole day, even the first time.
In addition, the Annual return to companies house takes about 10 minutes.

Nowadays you also have to do "live" reporting of all "income" payments. But even that is online and takes only a few minutes.

Vat I can't tell you, as I deliberately kept just under the threshold.

Once you start employing people (other than directors), then it gets complicated and you'll probably need an accountant to help. But until then, it is all pretty trivial.

The only time I ever had to phoen HMRC, was to CLOSE the company. Now that is difficult and obscure, and has negligible help anywhere. But once I finally got through to the right hmrc department (yes, it took nearly an hour), they sorted it in a few minutes.

Gryff

gryffron wrote:Nowadays you also have to do "live" reporting of all "income" payments. But even that is online and takes only a few minutes.

What?

Nobody has told me that and I don't.

Slarti

Slarti wrote:What?
Nobody has told me that and I don't.

It's called "RTI". As mentioned in FredBlogg's post.

Easy intro: https://www.sage.com/en-gb/blog/real-ti ... he-basics/
Details: https://www.gov.uk/government/publicati ... s-you-earn
Useful answer re Owner-Operator Companies: https://www.ukbusinessforums.co.uk/thre ... me.335810/

Gryff

gryffron wrote:

Slarti wrote:What?
Nobody has told me that and I don't.

It's called "RTI". As mentioned in FredBlogg's post.

Easy intro: https://www.sage.com/en-gb/blog/real-ti ... he-basics/
Details: https://www.gov.uk/government/publicati ... s-you-earn
Useful answer re Owner-Operator Companies: https://www.ukbusinessforums.co.uk/thre ... me.335810/

Gryff

That only affects payroll.

I declined to join PAYE.

Slarti

Remember the new requrirements for data protection stuff IF you are "caught"

GRDP or whatever its called

Though that is relevant for all businesses whether Ltd or not.

didds

Three things:

- do invest in one of the common accounting packages such as Sage and, unless you are familiar with financial accounting, pay an accountant that uses it to set it up for you. You will learn a lot about book-keeping...

- assuming you pay yourself a salary and not just dividends*, don’t bother about the Payroll add-on just to pay yourself. These are typically priced for businesses with several employees

- if you cross the VAT threshold you will be grateful to the accounting system when it stops you (e.g.) trying to make retrospective changes to prior VAT periods and generally getting into a mess

Apart from possibly financial year-end, none this is specific to incorporation or being a sole trader, but it will help you systematise your way of working.
Note that there is no requirement for either a sole trader or a director of a company without a service contract to enrol in a workplace pensions scheme such as NEST.

* - if you just take dividends, HMRC may wave their IR35 rule-book at you

stewamax wrote:do invest in one of the common accounting packages such as Sage...

Just to say, I never used any accounting software other than the hmrc website. It is, I concede, a bit clunky and basic, and probably painful for a larger or more involved business. But it's free and did everything I needed. The fact that there are so many options and opinions on third party software shows there is no obvious choice. For a simple business, I'd try the free stuff before deciding that you need to spend money - and time learning the s/w.

Gryff

The other option is to engage an accountant. Mine does everything - payroll, VAT, annual returns and my personal tax return. All I do is send him a quarterly download of my bank statements so he can calculate VAT payments, and an annual download so he can make up the accounts. For this he charges 65 a month plus VAT = 78 a month. For me it's worth it just for the removal of any hassle.

Cheers,
StepOne

StepOne wrote:The other option is to engage an accountant. Mine does everything - payroll, VAT, annual returns and my personal tax return. All I do is send him a quarterly download of my bank statements so he can calculate VAT payments, and an annual download so he can make up the accounts. For this he charges 65 a month plus VAT = 78 a month. For me it's worth it just for the removal of any hassle.

Cheers,
StepOne

Seriously, your account can do that with just your bank statements? No receipts for expenses? No invoices?

John

He's never asked for any. I've got receipts, although I don't really spend anything apart from the odd bit of travel. And no, he's never asked to see my invoices, although he does ask if I have any unpaid invoices outstanding at the end of the year.

I have been paying an Accountant to do my accounts (only) about £700/yr

I do VAT, Pensions, Dividends and Payroll for 2 Directors myself as well as 2x SA. I also setup and administer a SSAS pension scheme

I have considered to do my own, but I confess to not understanding some parts. I can do the Profit and Loss, but the Balance Sheet I do not understand things like:
- Fixed and Current Assets,
- Total assets less current liabilities,
- Creditors: amounts falling due within one year
- Accruals and deferred income
- Capital and reserves

Do I actually need these though?, as one year we were late in filing and I had to enter the figures into HMRC website/Companies House directly and it seemed a very small set of numbers needed

I might download my accounts from Companies House and see how they differ from the accounts I get given by my accountant