Company buy back own shares

Company buy back own shares

Company could buy back your own shares. Your company can finance your purchase or redemption of your own shares out of your capital by passing a special resolution. Your company can only do this provided there is no restriction or prohibition in your company’s articles of association.

Solvency statement

If your company finances your purchase by a payment out of its capital, your company directors must also make a statement about the solvency of your company immediately after the purchase and in the following year. All your company directors must sign the solvency statement.

Directors’ report and auditor’s report

Your company must make a copy of your solvency statement and your auditor’s report confirming your directors’ opinion and made available to your shareholders (members) at or before in the case of a written resolution. If your resolution is to be passed at a meeting, by making a copy of your directors’ statement and your auditor’s report available for inspection at that meeting.

Your company must also deliver a copy of your directors’ statement and your auditors report to Companies House no later than the day on which your company first publish or give notice of your proposed payment out of capital.

You may refer to the section 719 of the Companies Act 2006 for the requirements for publishing and giving notice on this matter.

Apply to court to cancel

Any shareholder of your company who did not consent or vote in favour of your resolution or any creditor of your company, can apply to court to cancel your resolution, within five weeks of the passing of your resolution.

The applicant to the court must complete and the Companies House form SH16 to be delivered to Companies House immediately. When your company receives notice of your court application, your company must immediately notify Companies House using the form SH17 and, within 15 days of the making of a court order, your company must deliver a copy of the order to Companies House.

Refer to Parts 17 and 18 of the Companies Act 2006 for further information on company shares administration required by law.

The changes in your company’s shares capital are to be included when filing your Confirmation Statement.

VAT annual accounting

VAT annual accounting

VAT Annual Accounting Scheme is suitable for company with annual sales below £1.35 million. If you opt to join VAT annual accounting scheme, your company only file VAT return once a year.

HM Revenue and Customs will set the estimated VAT liability to be paid by your company based on your previous year VAT return, if applicable.

Payment options and arrangement with HMRC

Your company simply makes VAT payment by direct debit or other approved electronic payment methods.

Your company must specifically request payment options to be on quarterly basis if not it will automatically be on monthly basis.

When to file VAT Return

Your company is required to submit your VAT return two months after your accounting year end together with the balance of VAT payment due.

Flexibility of Annual Accounting Scheme

Your company is entitled to request reduction in the interim payments if your sales is well below your previous year.

Your company may request to withdraw from the VAT annual accounting scheme any time by writing to HMRC.

Advantages of VAT Annual Accounting Scheme

  • The scheme provides your company with more predictable cash flow because your company will make regular payments on account throughout the year.
  • Possible cash flow advantage if your annual sales is foreseeable to increase each year.
  • Cut down substantial administrative work because you only need to send in one return per year

Your company must leave the VAT annual accounting scheme if your annual sales reaching and over £1.6 million.

Other VAT schemes available for business are the VAT flat rate scheme and VAT cash accounting scheme.

VAT cash accounting

VAT cash accounting

VAT cash accounting scheme is suitable for your business, if your annual sales are below £1,350,000.

Under this scheme, you still issue your VAT sale invoice the normal way except you only pay the VAT to HM Revenue and Customs (HMRC) when you received the money from your customers. This VAT scheme can give you significant cash flow advantage.

If you allow credit terms to your customers, you do not have to account for VAT on those sales invoices issued in your VAT returns until you have received the monies from your customers. If your customer never pays you, you never have to pay the VAT over to HMRC. Similarly, you cannot reclaim VAT on your purchases until you have actually paid your suppliers.

Your business must leave the VAT cash accounting scheme when your taxable turnover is more than £1.6 million.

There are other VAT schemes available for businesses, VAT Flat Rate Scheme and Annual Accounting Scheme.

Seek accountants advice if you have questions about VAT cash accounting scheme.

Choose your accountants wisely

Choose your accountants wisely

Concise tips in choosing accountants wisely to work with you on your business.

Accountants’ pricing

It is important to obtain couple of quotes from different accounting firms to compare the prices so that you are aware of the market rate and avoid being overcharged. Usually, accountants firm charge their clients by the hour. They will provide you with a quote based on the nature of your business assignment.

Ask the accountants:

  • How many people would be involved in your company’s affairs?
  • How they work out their charging rate?
  • How often they will issue invoice to you? monthly or as and when they complete your assignment.
  • Do they give credit terms, say 30 days from invoice date?
  • Would they communicate with you if they foresee the work involved is going to exceed the original quote given? You do not want to be quoted a fee of £1200 then being given a final invoice of £2000 to pay.

Some accountants firm offer fixed fee accounts packages to limited company. If you are just starting up your business it is best to go for fixed fee accounting package as you know exactly how to pay your accountants.

Accountant’s response time

Ask the accountants what is their response time within the firm? for example, they would reply to clients in 24 hours is their practice norm.

Would they be anyone else that you could contact if you could not get hold of the person in charge of your assignments?

Accountants’ specialist areas in business

Find out the accountants’ core competency. For example, if you have question involving international tax affairs, would they be able to handle or how would they able to assist you to get the result?

The size of the accountants’ firm

Ideally small to medium sized accountants are suitable for small to medium sized businesses.

Large companies are best to go for the big accountancy firms like PWC, KPMG, Deloitte and Ernst & Young and many more.

Attitude of Accountant in charge of your company affairs

It is very important that you have a rapport with the accountant that you would be regularly dealing with. Whether you feel comfortable with the person or with the way he/she handles your assignment.

Let take an example, if you are an impulsive person and you like to get things done fast, you would not be compatible to work with an accountant that has an attitude of managing its clients affairs on strictly first in first out basis.

If you are a positive thinking person, you may find it frustrating to work with an overly prudent accountant who come across almost negatives.

We believe in when there is a will, there will be a way in achieving whatever we want in business and in life. In other words, we can make the impossible possible. Choose like with like is the way to forward.

Convert business assets into cash

Convert business assets into cash

Convert business assets into cash by reviewing your fixed assets register to find which business asset can give you cash.

Fixed assets register is a summary of all assets owned by your company. It should contain information such as the asset description, date of purchase, value of the assets and economic useful life of each asset.

It is a good practice to review and update your company’s fixed assets register regularly to identify surplus or idle assets and to evaluate the condition of your physical asset to its value to ensure it is approximately close to it’s market value recorded.

Convert business assets into cash

  • Sell the surplus fixed assets such as land and buildings, plant and machinery, motor vehicles that your business would no longer need.
  • Assets that could potentially be made surplus and then disposed of, for example by subcontracting out your printing process, your in house printers would become surplus. Do this if it is more cost effective and efficient for your business going forward.
  • You could take advantage of the sale and lease back to get extra cash for the equipment you owned.
  • Hire out underutilized of plant and machinery capacity.
  • Sub let vacant factory and rent out vacant office space.
  • Disposed of separable and sale-able investments such as shares, subsidiaries or any parts of the business like a branch if they no longer serve your core business.
  • Sell idle equipment lying around in the factory or unused office furniture. The chances of the idle business assets being re-used is very small especially if they are stored in the warehouse or a storage room because people often forgot about them.

Cash is king. It is the life blood of your business.

Where to send VAT application

Where to send VAT application

You can apply for your VAT number online or by post.

Your business is required to register for VAT once your sales reached the VAT registration threshold. You may also register for VAT on voluntarily.

Your VAT application forms must be sent to the dedicated VAT office that deal with VAT registration if you are applying your VAT number by post.

You may appoint an accountant to handle your VAT application or you may apply directly with HM Revenue and Customs.

VAT application by post

Send your VAT application to the following HMRC office.

HMRC VAT Registration Service
Crown House
Birch Street
West Midlands

If you have any question about registering for VAT and you do not have representing accountants to deal with your application, you may contact VAT helpline on 0300 200 3700 for advice. They may also be able to help you with questions on how to update your VAT details or request for cancellation of your VAT registered status.

Bought a VAT Registered Business

If you have recently bought a VAT registered business and wish to keep the VAT number, your VAT1 and VAT68 forms must be sent to Grimsby VAT office. The full address is as follows:

Grimsby VAT Registration Unit
HM Revenue and Customs
Imperial House
77 Victoria Street
Grimsby DN31 1DB

VAT flat rate

VAT flat rate

VAT flat rate scheme set a fixed percentage to be applied when calculating your VAT payable to HM Revenue and Customs.

Your company may opt for VAT flat rate scheme if your annual sales is up to £150,000. Under this scheme, the business is not required to keep records on input tax on every purchase transaction. This may save considerable amount of time on VAT administration. However, businesses still need to keep records of their gross purchases and expenses for corporation tax purposes or income tax purposes.

No record for input tax

Your company charge a standard rate of VAT on sales as usual. The difference of this scheme to that of the standard VAT scheme is that your company does not need to account for input tax on expenses. Your company simply pays a percentage of VAT on sales including all reduced, zero-rated and exempt sales to HM Revenue and Customs.

VAT accounting records

It is high recommended for your company to keep your accounting records the same way as you would if you are under the Standard VAT scheme. This would enable you to monitor and compare if your company is paying more VAT under the VAT flat rate scheme to HMRC. If your company is persistently paying extra VAT, consider opting back to VAT standard rate scheme.

Your company must leave the flat rate scheme when its sales exceeded £150,000.

Calculate VAT payable under VAT flat rate scheme

You multiple your sales inclusive of VAT charged to your customers with the VAT flat rate applicable to your business.

For example, you provide IT consulting services. Your VAT flat rate is 14.5%. Lets say, your income from your consulting business is £10,000 and you charge 20% VAT on top. Your total income inclusive VAT is £12,000. The VAT payable to HMRC would be £1,740.

The VAT rates for businesses approved under the flat rate scheme vary and it is dependent on the business sector you are in.

VAT flat rate percentage by business sector
Type of businessCurrent VAT flat rate
Accountancy or bookkeeping14.5%
Agricultural services11%
Any other services not listed elsewhere12%
Architect, civil and structural engineer or surveyor14.5%
Boarding or care of animals12%
Business services that are not listed elsewhere12%
Catering services including restaurants and takeaways12.5%
Computer and IT consultancy or data processing14.5%
Computer repair services10.5%
Entertainment or journalism12.5%
Estate agency or property management services12%
Farming or agricultural that is not listed elsewhere6.5%
Film, radio, television or video production13%
Financial services13.5%
Forestry or fishing10.5%
General building or construction services*9.5%
Hairdressing or other beauty treatment services13%
Hiring or renting goods9.5%
Hotel or accommodation10.5%
Investigation or security12%
Labour only building or construction services*14.5%
Laundry or dry cleaning services12%
Lawyer or legal services14.5%
Library, archive, museum or other cultural activity9.5%
Management consultancy14%
Manufacturing fabricated metal products10.5%
Manufacturing food9%
Manufacturing not listed elsewhere 9.5%
Manufacturing yarn, textiles or clothing9%
Membership organization8%
Mining or quarrying10%
Post offices5%
Real estate activity not listed elsewhere14%
Repairing personal or household goods10%
Repairing vehicles8.5%
Retailing food, confectionery, tobacco, newspapers or children’s clothing4%
Retailing pharmaceuticals, medical goods, cosmetics or toiletries8%
Retailing that is not listed elsewhere7.5%
Retailing vehicles or fuel6.5%
Secretarial services13%
Social work11%
Sport or recreation8.5%
Transport or storage, including couriers, freight, removals and taxis10%
Travel agency10.5%
Veterinary medicine11%
Wholesaling agricultural products8%
Wholesaling food7.5%
Wholesaling that is not listed elsewhere8.5%

*Labour only building or construction services means building or construction services where the materials costs supplied is less than 10% of relevant turnover from such services. If more than this amount, your business is classed as general building or construction services.

Seek accountants advice if you have any questions about VAT flat rate scheme.

Lifetime ISA

Lifetime ISA

Lifetime ISA is an individual savings account introduced by the government to help people living in the United Kingdom to save for later life and/or to buy their first home in the UK.

Lifetime ISA is a tax free savings account. Every £100 you put in your Lifetime ISA, the government would pay you £25. In other words, the government will add 25% bonus to your savings.

Age limit

You must be over 18 of age and under 40. You must be living in the United Kingdom to be eligible to open a Lifetime ISA account unless you are a Crown Servant (i.e. a diplomat or civil servant) or their spouse or civil partner.

Saving per year

The maximum you could put in your Lifetime ISA account is £4000 per year and can continue until you reach the age of 50. After you reach 50, you would not be able to put in any more money in it. you account will stay open and your savings will still earn interest or investment returns.

25% Withdrawal charge

If you withdraw your money from your Lifetime ISA account before you reach the age of 60, the government would take back the 25%, they called it a withdrawal charge.

The withdrawal charge would not be levied if you are:

  • Using the money to buy your first home.
  • Aged 60
  • Terminally ill with less than 12 months to live
  • Transferring to another Lifetime ISA with a different provider.
Use Lifetime ISA to buy first home

You can use your Lifetime ISA to buy your first home, if you have opened the ISA account for more than 12 months. You are buying your home with a mortgage. You property price is below £450,000. You must instruct your a solicitor or a conveyancer to apply for the fund in your ISA account and the fund will pay directly to them.

You can transfer money from Help to buy ISA to your Lifetime ISA. Take note that the 25% withdrawal charge applied to you if you transfer money from Lifetime ISA to Help to Buy ISA.

Further reading about Lifetime ISA account, click here.

Help to buy ISA

Help to buy ISA

Help to buy ISA is introduced on 1 December 2015 to help people living in the United Kingdom to buy their first home. The government would pay £50 bonus for every £200 you saved in your Help to buy ISA account.

Your initial deposit into your Help to Buy ISA can be up to £1200 and thereafter £200 a month. The bonus is capped at £3000 on £12,000 savings. The bonus is tax free.

You must be 16 years of age, have a valid National Insurance number and a resident in the United Kingdom.

Your first home must be in the United Kingdom. This will be the only property you own and you intend to live there. You are buying your first home with a mortgage.

If your property is in London, the purchase price must not exceed £450,000. Anywhere else in the United Kingdom, your purchase price must not over £250,000.

You may use the ISA calculator to work out how much government bonus you will receive based on the saving you put in your Help to buy ISA account.

Business with new accountants

Business with new accountants

Business with your accountants is important.

New accountants would write to your existing or former accountants to enquire before they accept your appointment as new client.

You would be ask to provide contact details of your previous accountants for this purpose.

Accountants’ fees

Ask your new Accountants to provide you with a quote of the accountancy services you required for your business. Be clear with the scope of work for the quoted fee.

Some accountants offer fixed fee accounts packages for limited company and other may quote you rate per hour for your assignment.

If your accountants quoted you rate per hour, ask them the estimated time they would take complete your assignment so that you know roughly how much it would cost you.

Questions for Accountants

Some people like to send long list of questions to their accountants asking possibility of doing this and that business and what is the tax implication of each business model.

Your accountants would usually charge for this kind of assignment.

It is good to seek accountants advice on your business model. Be specific about your questions on your business model if possible. This would help your accountants to gather information quickly for your business model and you save money too.

Dedicated accountant service

Dedicated accountant service comes with a reasonable quality price tag, if you would like to have direct access to a specialist tax accountant for example.

Ask your new accountants for the fees quoted to you, whether there will be a dedicated accountant as your main contact point if you have any questions about your company affairs.

If various accountants within the firm would be involved in your assignments, ask what is the best way for you to communicate if you have questions about your company transactions.

Communication is the key.