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Transferring Your Sole Trader Business To A Limited Company (2003-06-27)

In order to transfer your business to your new limited company you will need to do the following:

1. Set up a new business bank account in the name of the Limited Company.
   Your bank should be able to help you with this but you will need The Certificate of Incorporation and a copy of the Articles and Memorandum of the company. You may be asked to prove your identity, with a passport or driving license, to comply with the new Money Laundering Regulations introduced this year.
2. Get your new stationery printed including address of Registered office and Company registration number. This might also be needed to set up the company bank account.
3. If you are registered for Vat you will need to transfer your Vat registration or apply for a new registration for the limited company. If applying to transfer your registration both a Vat 1 and Vat 68 will need to be completed.
4. Consider situation regarding insurance policies, professional indemnity and employers liability insurances. These may need transferring into the Limited Company’s name.
5. Consider taking advice from Financial Advisor regarding any Personal Pension Plans and transferring these to the Limited Company.
6. If Leases held in the name of the Sole Trader consider taking legal advice regarding the transfer of the lease into the Limited Company’s name.
7. Choose a date for the company to start trading. Inform your suppliers of the change of name and ask for future purchase invoices to be raised in the Company name. Any purchase invoices received before this date should be paid from the sole trader account if possible and any receipts for invoices raised in the sole trader name should be banked in the sole trader bank account. If this is not possible make sure that you can identify any receipts and payments that relate to the period that you were a sole trader. You do not want to be paying tax on any income twice. From this date onwards you will need to raise invoices in the new company name and bank any associated receipts into the new bank account like wise any goods or services purchased after this date should be paid for from the company account.
8. You will no longer be allowed to draw money from the Company as drawings. Instead you will need to operate a proper payroll system and pay yourself a weekly or monthly salary. The Revenue is notified by Companies House that a new company has been set up, the revenue then allocate a corporation tax reference to the company and ask for various details about the company on the Corporation Tax New Company Details Form. On receiving this back they set up a PAYE scheme for the company. We can give any help and advice on the operation of the PAYE scheme that you may require or operate the payroll for you.
9. If your car is part of the assets of your sole trader accounts and you have paid all your motor expenses through your sole trader accounts you may have to change the way you treat the car and motor expenses.
   
   A car provided by the company is considered to be a benefit in kind and is treated as additional income and is taxable. The amount of the benefit depends on the sort of car you have and is based on the Co2 emissions of the car and the list price of the car. In general the lower the Co2 emissions the lower the benefit in kind. In general it is probably better for any cars to be kept out of the company and to be treated as private cars however this may vary depending on individual circumstances. The individual can then claim mileage from the company for all business mileage at the rates of 40p/mile for the first 10,000 and 25p/mile thereafter. This means that you have to pay for all your motor expenses out of the salary that you draw from the business and submit expenses claims to the company for your business mileage. (Please note that the Revenue does not consider travel from home to your place of work a business journey). Were you ever to have a PAYE Compliance Visit from the Revenue they would expect to see documentary evidence to support any mileage claims including details of journeys made and purpose of the visit.
10. Remember we will still need to prepare sole trader accounts to the date of transfer to the Limited company for inclusion on you Self Assessment Returns. So keep all your records and let us have them as soon as possible after the transfer of the business. We will then be able to give you an estimate of the amount of tax you will need to pay and when it is payable. If the transfer is made in the tax year 2002/03 remember you may still have a self assessment liability due on 31 January 2004. (for transfers made in 2003/04 - liability will be due 31 January 2005)

SOME DATES EXPLAINED AND DATES TO REMEMBER

Company Year End

This depends on the date of Incorporation

For example :
a company incorporated on 16 July 2003 will have a year end of 31 July
a company incorporated on 25 March 2003 will have a year end of 31 March.

This date can be changed by filling in Form 225 but the first period of account can not exceed 18 months in length. A company year end cannot be changed retrospectively.

Filing Deadlines

All companies have to file accounts with Companies House even if they have not traded. If accounts are filed late there will be an automatic penalty. This starts at £100 and can rise to £1000 depending on how late accounts are filed.

Accounts have to be filed 10 months after the Company’s Year end
Eg Accounts for the year ended 31 March 2003 must be filed by 31 January 2004

Please note in the first year of a company the filing deadline is calculated based on the date of incorporation not the month end
Eg Accounts for the year ended 31 March 2003 for a company incorporated on 3 March 2002 must be filed by 3 January 2004 not 31 January 2004.

Corporation Tax Payment Date

The Corporation tax liability of a Company is due 9 months and one day after the year end.

For Year end 31 March 2003 the Corporation tax is due 1 January 2004

It may be the case that the Corporation tax is payable before the accounts have been prepared if you are late getting the books in. If this is the case interest will be charged by the Revenue.

Self Assessment Return Due Date

this is always 31 January
Eg 2002/03 Return is due by 31 January 2004

Annual Return

This shows the details of your company held at Companies House and is reviewed every year by completing an Annual Return and paying an annual filing fee of £15.