Cut red tape … get a P11d dispensation
For those of you who are one-person limited companies and/or have employees, you may be aware that reimbursements of expenses (excluding mileage within approved rates) should be reported to the Inland Revenue on P9d or P11d and included within the claimant’s tax return. This can add quite a burden onto the company’s administration and also incur fines if returns are not completed correctly or submitted late.
However, there is an easy way to reduce this administrative burden – apply for an expense dispensation.
Depending upon the type of business, various business expenditure can be included within the dispensation and may remove the need to complete p9d/p11d for some employees (car, fuel, health insurance etc benefits must still be reported).
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How to dissolve your limited company from £10.00
If your limited company is no longer required, for example if the company was set up for a specific project which has now finished, you can apply to have it struck off from the register at Companies House.
This brief guide relates to striking off formerly trading companies which have now stopped trading and are no longer required. It does not refer to a formal insolvency process.
To quote Companies House …
“A private company can apply to be struck off if, in the previous three months, it has not:
- traded or otherwise carried on business;
- changed its name;
- for value, disposed of property or rights that, immediately before it ceased to be in business or trade, it held for disposal or gain in the normal course of its business or trade (for example, a company in business to sell apples could not continue selling apples during that three-month period but it could sell the truck it once used to deliver the apples or the warehouse where they were stored);
- engaged in any other activity except one necessary or expedient for making a striking-off application, settling the company’s affairs or meeting a statutory requirement (for example, a company may seek professional advice on the application, pay the costs of copying the Form 652a, etc). However, a company can apply for striking off if it has settled trading or business debts in the previous three months.”
This course of action, known as a Section 652 striking off, is applicable where all creditors have been paid and final accounts and tax computations have been prepared, otherwise creditors can oppose the striking off and alternative, more expensive methods of dissolving the company would need to be taken.
Other things to consider before an application is made include closing the company’s bank account, transferring domain names, paying any professional fees involved with the striking off etc. These should be done before you apply for striking off, otherwise the assets may become the Crown’s property (see below) .
For example if your company ceased trading on 31 July 2008, you can apply under S652 from 1 November 2008. You can (and should) however distribute the assets prior to this date.
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Maximise use of your basic rate tax band
I originally posted this article on the a4uforum in March 2007, and have updated it for the current (2012/13) tax thresholds.
We recommend to all our clients that they maximise the use of their basic rate band. This can be done by declaring interim dividends to take total taxable income upto the maximum at which the basic rate will still apply.
As dividends have a 10% tax credit attached, this tax credit can be used to effectively pay your personal tax liability on the dividend.
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A quick guide for your new limited company
Getting at your profits
Extracting your profits from your company can be by a mix of wage (ie under PAYE) and dividend. In order to pay a dividend the company must have sufficient after tax profits. ie for a £10,000 dividend to be paid the company must have at least £12,500 pre-tax profits (corp tax rate of 20%).
Do not be tempted to withdraw more than is legally available as dividend, as it would be void and treated as a loan repayable to the company. If the loan is to the director it would be a taxable benefit in kind if over £5,000 .
For more on how to extract your profits in a tax efficient way, read our article “Save tax and National Insurance with your limited company”.
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