After setting up a limited company for contracting purposes, it is necessary to appoint at least one director and one secretary. As the beneficial owner/shareholder and principle employee of the company, it is appropriate for you to be the sole company director.
This article discusses your legal obligations as a company director.
Director’s responsibilities
It is your responsibility to manage the company in accordance with the Articles
of Association and company law.
Your main personal responsibility is to ensure that statutory documents are
delivered to the Registrar of Companies as and when required by the Companies
Act. In particular, you are required to file:
-
Accounts
-
Annual Returns (form 363)
-
Notice of change of directors’ and secretary or in their particulars (e.g.
change of address)
-
Notice of change of the company Registered Office (form 287)
What happens if accounts or annual returns are not filed?
As the company’s director, you could be prosecuted personally.
Failure to deliver documents on time is a criminal offence. On conviction, a
director could end up with a criminal record and a fine of up to £5,000 for
each offence.
Approximately 1,000 directors are prosecuted each year for failing to deliver
accounts and returns to the Registrar on time. Persistent failure to deliver
statutory documents on time may also lead to the director being disqualified
from taking part in the management of a company for a specified period.
What happens if accounts are delivered late?
Since you are the director of a Private Limited Company, you will normally have
a maximum of ten months from the accounting reference date in which to deliver
your company’s accounts to the Registrar of Companies.
If you file the accounts late, then the minimum fine is £100, which rises up to
a maximum of £1,000 if the accounts are more than one year late.
Corporation tax matters
In addition to filing the annual accounts with Companies House, you must also
file them with HMRC (Corporation Tax Inspector), together with a
corporation tax return (form CT600) and a corporation tax computation.
The corporation tax and forms must be filed within nine months of the company’s
year end date, following which a penalty of £100 is payable and interest may be
charged on overdue tax.
Payroll matters
As company director, it is your responsibility to fully comply with all payroll
regulations, including IR35 issues.
Including filing of the Employers Annual Return (form P35), form P60, P14,
P11D, P11D(b) and an IR35 calculation where appropriate.
You are required to make PAYE and National Insurance payments in due time
throughout the year by the due dates.
Isn’t my accountant supposed to be doing all of this?
Your accountants’ responsibilities depend on the agreement you have with them
and they are of course ethically bound to carry out all duties and
responsibilities for which they are instructed and paid.
It is however, your personal responsibility to ensure that the accounts and
other statutory documents, etc. are done as required by law and by the due
dates.
This responsibility rests with you as the director of the company and you will
need to ensure that your accountants have all of the necessary information to
prepare your accounts, payroll affairs, etc. If necessary, you may need to
chase them – don’t just assume that they are getting on with the job.
How can I avoid all of these responsibilities?
David Colom
Principal
D J Colom & Co Chartered Accountants
David Colom qualified as a Chartered Accountant in the City of London in 1981 and is the founder and principal of D J Colom & Co Chartered Accountants established in 1989.
Started specialising in serving IT contractors in 1993 and is now one of the longest standing suoppliers of accountancy services to computer contractors.
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The most common and easiest way for a contractor to avoid all of the above
responsibilities is to use the services of an umbrella company.
With that system, you will almost certainly not be a company director and it
will be the responsibility of the umbrella company and it’s directors to ensure
that all director responsibilities are carried out.
Updated: Thursday, January 06, 2011
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