Companies differ from businesses in that they are a separate legal entity that lives on beyond the lifespan of the previous owner, saving owners from being personally liable for debts. The transfer of control means that a company can potentially continue for as long as there are people who operate under it. For a limited company to end, it has to become “dissolved”.

But what is does dissolving a company mean? In this article, we outline this, the legal framework around it, the process of dissolving a company and more.

The “dissolved company” meaning

A dissolved company is one that has been formally struck off and removed from the Companies House register under the Companies Act 2006. This differs from a company simply having no employees and quitting trading, as it officially marks the end of its function as a limited company. It cannot hold assets, enter into contracts, incur liabilities and its former assets rest in the Crown as “bona vacantia”, meaning it’s ownerless property. This, effectively, means the company ceases to exist, with serious legal consequences occurring in the event that trade continues in its name.

Dissolving a company happens for many reasons:

• Ceased trading or purpose served – Many small or one-person companies end due to never getting off the ground, or completing the project that they were formed to complete. In the case of limited companies that have never owned assets/liabilities or traded, a voluntary dissolution is available.
• Retirement or change of direction – Company directors or founders may retire or sell their business line and find no more use for the current company. Another reason can be that they wish to operate under a different structure, such as a partnership, and company dissolution can allow them to extract the remaining assets tax-efficiently for shareholders after outstanding debts are paid.
• Insolvency or creditors’ actions – If a company becomes insolvent, meaning its liabilities exceed its business assets or ability to make payments, it may enter a creditors’ voluntary liquidation. When consistent failure to meet payments occurs, creditors can petition the court for compulsory liquidation.
• Regulatory non-compliance – Companies House can strike off a company from the official register if it fails to abide by the multitude of obligations it signed off for, such as annual accounts or confirmation statements. Alternatively, prolonged inactivity can initiate compulsory strike-off.

What are the different types of company dissolution processes?

There are five main types of dissolution processes. All voluntary strike-off procedures are actioned through the Companies House website, whereas non-voluntary action must take place through court orders.

Voluntary dissolution

The voluntary process, often called a “strike-off”, is the simplest kind of process that leads to a dissolved company. It is reserved for a solvent company, which means the organisation has sufficient assets and has no outstanding debts or arrangements with creditors. Its defining feature is that it’s done unilaterally, meaning all interested parties are behind the decision, and have the power to dispute it if against.

It is a cost-effective way to dissolve a company without lasting consequences through a simple, streamlined procedure:

1. Eligibility criteria – The company must not have bought or sold goods or services, nor sold any assets for gain in the ordinary course of business, during the three months before the application. They must also not have changed name, nor must they be subject to any insolvency proceedings (e.g a company voluntary arrangement).
2. Application process – Company directors (all of them) must complete and sign a DS01 form, also known as an application for “strike-off”. Applying online costs £33, whereas a paper DS01 costs £44.
3. Post-application timeline – Within a few days of receiving the DS01, the public register will publish a “first notice” in The Gazette that announces the intended strike-off. From there, interested parties have at least two months to object to the strike-off. Should no valid objections be raised, Companies House issues a second notice, and it converts to a dissolved company.

Members voluntary liquidation

Dissolving a company via this method is only available to solvent companies, after undergoing both balance-sheet and cash-flow tests and paying all outstanding debts in full within 12 months of the process commencing. It is done with the assistance of a licensed insolvency practitioner (IP) to ensure compliance with regulations, give professional advice and maximise tax efficiency.

It happens during the following steps:

1. Declaration of solvency – The majority of company directors must sign a statutory declaration of solvency within five weeks before the resolution to wind up, stating that after making a full inquiry into the company’s affairs, directors believe the company can pay all its debts.
2. Shareholders’ resolutions and appointment of IP – Within five weeks of the declaration, the company calls a general meeting where at least 75% of shareholders (by value), must pass a special resolution to wind up the company via MVL. During this meeting, an IP is formally appointed as liquidator to administer the process and safeguard stakeholder interests.
3. Notification and gazette advertisement – Within 13 days of the resolution, the liquidator places a final notice in The Gazette. This will alert the creditors and other interested parties to the impending liquidation.
4. Realisation of assets and distribution – The IP collects and sells assets tied to the company bank accounts, settles all creditor claims (such as HMRC’s dues and final staff wages), and distributes any surplus funds to shareholders. Distribution is treated as capital relief rather than income. This potentially qualifies for Business Asset Disposal Relief at a 10% capital gains rate.
5. Final statutory accounts and dissolution – After distributing the rest of the assets, paying final staff wages and fulfilling statutory obligations, the liquidator will prepare the final account and company tax return with Companies House.

Creditors voluntary liquidation

If directors seek to dissolve a company voluntarily, but it is insolvent, this procedure allows it under the Insolvency Act 1986. CVLs allow directors to wind up the company in a controlled way, with oversight by creditors and a licensed insolvency practitioner.

1. Decision to liquidate – The company directors assess the company’s financial position and find it has financial difficulties that it has no realistic chance of overcoming. A board meeting is called, and they prepare a statement of affairs, detailing all assets and liabilities, to inform creditors and IP of the company’s position.
2. Shareholders’ resolution – The board will give at least 14 days’ notice of a general meeting, as a special resolution to wind up the company requires 75% of shareholders by value.
3. Notification of creditors – Within 14 days of the resolution, creditors must be notified in writing of the winding-up decision and the date of the creditors’ meeting. The IP will place a notice in The Gazette, alerting any other creditors and interested parties.
4. Creditors meeting and appointment of liquidator – 14 days after the notice, creditors review the Statement of Affairs and can question directors and the proposed IP. They may nominate an alternative liquidator if they wish. By default, the IP is nominated by directors unless creditors vote otherwise, but the IP’s duty is to the creditors, not the directors.
5. Liquidator takes action – Once the IP is nominated, they secure and sell the company assets. They investigate the company’s affairs and the director’s conduct, reporting any misconduct to the insolvency service. Proceeds are distributed in statutory order: secured creditors, preferential creditors, unsecured creditors and finally any surplus to shareholders.
6. Conclusion – Upon realisation of asset distribution, the IP calls a final meeting to creditors and, then, a final meeting of members if any surplus exists to present accounts of liquidation. After filing accounts, the IP applies to have the company struck off the Companies House register.

Compulsory Liquidation

Compulsory, as the name implies, is a process in which the company’s dissolution occurs regardless of the company director’s wishes. Under part IV of the Insolvency Act 1986, creditors (including HMRC themselves) can petition the court to wind up an insolvent company if it cannot act on unpaid debts. This usually, but not always, occurs after a statutory demand or a judgment for payment goes unpaid.

The process is as follows:

1. Court order – If the judge finds the company has no viable reason to continue trading, then it will issue an order to start the process.
2. Official receiver – An official receiver will be appointed to investigate company assets, creditors and former directors. They may be paired with a licensed IP later in the process to liquidate assets and distribute proceeds, if possible.
3. Company dissolution – Once all obligations are met, the company is dissolved.

Compulsory strike off

If a company fails to meet basic obligations, such as filing confirmation statements, annual accounts or tax returns, then Companies House may assume the company is not carrying on business or in operation. This gives them the power to mandate that the company is dissolved.

1. Warning – Companies House will issue a formal warning before company dissolution. This will allow a two-month objection period before the company is officially dissolved, during which any interested party can object to the strike-off, so long as they have valid reasoning. Common objections are ongoing legal proceedings, outstanding debts, or that some other type of company dissolution is in the works.
2. Company dissolution – Company dissolution will commence after the time period has passed. Assets become bona vacantia and are passed to the crown, and business activities cease.

What obligations do I have before the company is dissolved?

For directors and other authoritative figures in a company, there exist certain obligations that have to be handled before the company is dissolved. Failure to meet them may cause the company to be investigated, delayed dissolution or directors being held personally liable for misconduct.

1. Staff and wages – All final staff wages must be paid, including holiday pay, bonuses and notice periods. For staff who are made redundant, staff redundancy rules may apply, meaning proper notice must be given, redundancy letters must be issued, and statutory redundancy payments made where eligible. Redundancy pay is treated as a preferential creditor claim in insolvency, and may be covered by the national insurance fund in a CVL if a company cannot afford the payment.
2. Final company filings – Final statutory accounts must be prepped and submitted to Companies House. Information about the company’s last trading period will be clearly outlined within, and is a legal requirement before dissolution. A final company tax return must be sent to HMRC, including any final corporation tax liabilities.
3. Business assets – What happens to assets differs according to what type of company dissolution is taking place, with any assets not dealt with before dissolution may vest in the Crown as bona vacantia.
   • Member’s voluntary liquidation – Assets are distributed tax-efficiently to shareholders.
   • Creditors’ voluntary liquidation – Assets are sold to repay creditors, with a licensed insolvency practitioner managing the process.
4. Closing accounts and notifications – Companies must close all business bank accounts and inform HMRC that the company is ceasing to trade. Directors should ensure the register contains correct information to avoid and defend against allegations of unfit conduct or misleading the registrar.

Can you reverse the company dissolution?

Yes, although the process is as rigid as dissolving a company. There are several points that you can reverse the company’s dissolution.

• Before company dissolution – Within the two-month Gazette notice period, dissolution can be halted. Send a formal objection explaining why the strike-off cannot proceed.
• After the company is dissolved – If the company was struck off by Companies House, you can restore it so long as the company was active at the point of dissolution, and all outstanding documents and penalties are filed and paid. If it was voluntarily dissolved, you must show a valid reason for its dissolution and appeal.

Conclusion

Dissolving a company is a lengthy and often stressful process, one that reflects the price of creating an organisation granting limited liability that is designed to last beyond its owners. The process is designed to protect interested parties as much as possible, provided all Companies House’s requirements are met.

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Debit finance is just one way a business can raise capital when it’s starting out. Rather than looking to investors and drumming up support from new shareholders, you fund business activities at the start with a specific type of loan. Here you keep the business interests your own (full ownership with nobody holding you accountable), but you will need to repay the loan amount over time, with interest payments on top, according to the loan terms and timescale. Failing to do so could result in your business closing and debts spiralling.

We don’t give you that warning to stop you. Debt financing works for some businesses and can be a great way for you to keep control of your business without having anybody to answer to – like you would if you asked for investment from others. When your business borrows money, you only need to ensure the business loans are repaid each month according to the repayment schedule to avoid repercussions, leaving you free to run your business however you please.

Why Is It Called Debit Financing?

Debit is an accounting term for any payment associated with the purchase of assets or an expense. Debt is money that is owed and needs to be paid back – often with interest. Debit financing is usually called debt financing because it requires repayment and incurs interest. But it can also be referred to as debit finance because it is directly linked to business assets.

Either way, debt financing and debit financing are the same thing and refer to how debt funding is used to kickstart your business, rather than relying on investors.

Equity Financing vs Debit Financing

When it comes to funding a business, capital is paramount. Capital is the operating money that you need to get your business running smoothly before you start bringing in money to break even and eventually turn a profit. Capital comes first and cash flow follows. There are two types of capital: equity and debt. Equity and debt are very different and will have different bearings on your business so it is important to understand your business needs and the type of capital that will work best for you.

Equity funding involves selling shares in the company. Equity investors they pay to be a shareholder at your business and are entitled to shareholder payments throughout the years as your business turns a profit. Essentially, they pay upfront for your business’ future success. It’s these future profits that they’re entitled to a cut of.

Debt financing, as we’ve already talked about, means you borrow to get started.

Is Debt Financing Secured Against An Asset?

Yes, debt financing is usually secured against an asset as it gives the lender assurance that they won’t lose money from the deal because they can claim the asset if the loan is not repaid according to the deal agreement. Common assets used in debit finance include property, vehicles, or equipment, depending on the size of the loan.

In addition to putting up an asset as collateral, you will also be required to pay interest on your loan and pay it back within a set timeframe. Interest can be fixed or floating, depending on your lender and the terms of the loan. The one advantage here is that because there is an asset tied to the loan, interest rates are usually lower.

In some cases, capital is not the problem, but operating costs are. Some more established businesses will also use debit finance to help them with daily operating costs when they have cash flow problems. This is the preferred method over overdrafts for handling long-term debts as well where repayments are likely to take months rather than weeks. It is more secure for lenders because of the asset attached, and there are usually lower interest rates for the business.

There can be advantages of debt financing when used in the right way.

Examples Of Debit Finance

Debit finance comes in many different forms, from peer-to-peer loans to traditional bank loans.

Traditional Bank Loans

These are becoming harder to find for small and new businesses as banks and building societies start to handle their risks differently. There are a lot of requirements that banks have in place for debit finance and they are more likely to lend money to established businesses where they have a higher guarantee of return. Banks often also put in place guidelines for the type of loan they are giving. That could mean the money is earmarked for equipment or salaries, but you need to be able to show that the money has covered the intended expense.

Personal Loans

For sole traders and partnerships, you may be able to get a personal loan. There is a risk here as you will need to put up personal property as collateral against the loan and if you are unable to make payments you risk losing personal assets.

Family And Friends

If you are lucky enough to have friends and family with deep pockets, family and friends loans could be a good choice. Loan terms are usually looser and you are more likely to be able to negotiate terms if you need to.

However, there is significant risk associated with loans from friends and family. Borrowing from a lender means you borrow money from someone who fully understands the risks, and if you can’t repay them for any reason, there is no damage to an existing relationship. When you borrow money from people you know there is the risk of them not fully understanding the risks they are incurring. You must factor in that if you are unable to pay them back you could lose a relationship.

If you choose a family and friends loan it is vital to have a written and signed agreement in place to protect both you and them. You should also make sure you explain exactly what the loan is for, the terms of repayment that are expected, and the risks that are involved.

Peer-To-Peer (P2P)

Peer-to-peer lending is common these days for new businesses, especially businesses that are niche or are based on ethical values. Websites like KickStarter, Prosper, and GoFundMe allow lenders to give to businesses that they believe in.

This is not a true form of debit finance as there is no risk to the business and no collateral attached. But if a business can’t produce the service or product that has been promised, they risk losing a global reputation and following, meaning it could be almost impossible to get the business running again.

Invoice Financing

This is an example of debt financing for cash flow when a business is already up and running. Once debt financing occurs here, you’ll need to be very mindful of what has been used to borrow and what hasn’t.

Essentially with invoice financing you use unpaid customer invoices to access funds before they pay. You can sell your invoices to a third party finance to access cash from them, and they will then collect payment when the invoice is paid – plus interest payments to make it worth their while of course.

These forms of cash flow loans provide you with working capital in the here and now, but it can be one of the riskier forms of secured loans because there isn’t always a guarantee the customer will pay the invoice in the short term. Selling debt instruments like invoices when you can’t guarantee payment in time could land you in hot water so it’s important that you’re careful.

Merchant Cash Advances

Merchant cash advances are other forms of debt financing. They work by helping you raise capital at the start of your business venture. There are different types of debt in business when debt financing. Some you have a repayment schedule for, and others involve striking a deal with the lender to give them a cut of future profits. Both debt financing options require care.

For merchant cash advances, you strike a deal. If your business uses debit or credit cards then you can work with a lender offering merchant cash advances to raise capital now. Here, you borrow money from the lender which is then paid back via a % of the debit and credit card payments received whilst your business is running.

They won’t take the % of your sales forever, of course, but usually long enough for the lender to get their money back and earn quite a bit for themselves in interest payments.

Home Equity Loans

Home equity loans work in a similar way to a mortgage in that you are expected to pay the same amount on a regular basis including interest repayments. The loan is secured by your property so there is usually a lower interest rate, but this puts your property at risk should you find yourself unable to pay.

How Does Debit Finance Work?

Debit finance is typically divided into two categories: long-term loans and short-term loans. The type of loan you get depends on your needs and you will need to factor in what the loan is specifically for, how long it will take to repay the loan, and what kind of interest you are willing and able to pay.

Long-Term Debit Finance

Businesses are likely to choose long-term debit finance if they need to purchase larger items like property, vehicles, equipment, machinery, or buildings. These loans are often secured against the item that is being purchased and terms of repayment are longer, usually lasting between three and seven years or more.

Long-term loans are usually predictable in their repayments with a fixed interest rate and payment made for the same amount and at the same time each month. This makes budgeting easier as you will always know what money needs to come out of your account every month to repay the loan. Making these regular payments can also increase your credit score and improve your chances of borrowing again in the future should you need it for business expansion or further product or service development.

Short-Term Debit Finance

This type of financing is usually used to combat cash flow problems and help businesses with basic operating capital. Small payments or purchases such as wages, inventory, or bills might be covered by this type of loan if the business knows there will be income in the following months to cover the borrowed amount.

Short-term debit finance usually has to be paid back within a year and is usually secured against a smaller asset that the business owns. It is a lot more popular for smaller businesses and start-ups because it helps with temporary cash flow problems and is a debt that can be resolved within a year rather than several years.

What To Consider Before Debit Financing

Before you decide to finance your business with debit rather than equity, there are important considerations that you need to make to decide if this is right for your business.

You will need to consider the cost of debt to your business against the cost of equity. The cost of debt will be interest and repayments on the loan while the cost of equity will be dividend payments to shareholders. Comparing what will be owed in each case will help you decide which form of financing is more feasible and profitable for your business in the long run.

Remember to factor in any tax deductions you might be able to make on things like interest on loans as this could make a difference to your bottom line as well.

You will also need to carefully consider the interest rates of various lenders and what they are offering you. Although most lenders will stay within a certain interest bracket based on market rates and your credit score, you may be able to find a lender with a lower rate, or one with better terms for long-term loans. On a longer term loan you might want to look for fixed interest rates to ensure you have fixed payments for a few years that are predictable.

Remember that just because a lender has better interest rates does not mean they are a better choice for your business. Check all the legal terms and conditions and make sure you borrow from a reputable source.

What Are The Advantages Of Debit Finance?

If you are still trying to decide if debit finance is right for you, it may be time to weigh up the pros and cons of borrowing against assets.

One of the biggest advantages and a reason a lot of businesses choose debit finance is that you remain in sole command of your company. You will not have to report back to shareholders or share profits with other stakeholders. Knowing that you will take home all the profits from your business can be a big draw for debit finance over equity finance.

Interest on loans is also tax-deductible as a business expense. This means lower taxes on your business and, if you have a long-term loan, reduced monthly expenses. If the interest is fixed, it also means budgeting is more straightforward. You will know exactly how much you need to repay every month and can easily budget the repayments and ensure they are always up to date; paid in full and on time.

Timely payments of debit finance loans can also help to build your business’ credit score, making borrowing in the future a lot easier. A good credit rating will also make your business look more appealing to future investors if you choose to go that way in the future.

Long term debit finance also offers greater stability to a company because the terms are clear and the loan spans many years. Interest rates are typically lower than on short-term loans and overall the loan is likely to work out cheaper.

What Are The Disadvantages Of Debit Finance?

There are also distinct disadvantages to choosing to finance your business through debt rather than equity.

As already stated, you will need to put up collateral against your loan so that the lender has security that they won’t lose money. For bigger businesses this might not be as much of a problem, but for small businesses where there are not a lot of assets, many lenders will expect personal assets to be used as collateral. Personal guarantees put you directly at risk rather than only risking your business.

Risk associated with personal guarantee carries to incorporated businesses as well and doesn’t only apply to sole traders and partnerships. You will need to be prepared to lose your car, house, or other asset you put up as collateral in the event of not being able to pay back the loan with business income.

You will also need a proven track record for most lenders to consider you for a loan. That means your business usually needs to be more established and needs to have built up a credit score before you can even apply for a loan.

Fixed repayment schedules, especially on long-term loans, can also be a disadvantage to certain businesses as they can prevent businesses from growing. If you are constantly trying to catch up on repayments it is harder to focus on turning a profit and difficult to build up lump sums of money that can be reinvested in the business.

You will need to be extremely disciplined with your money to ensure you make your payments on time. If you become too dependent on debt then you may be seen as a high risk company and find that fewer lenders will give you loans in the future.

Finally, if your business is bigger you will also need to consider how much money you are able to borrow. Often, debit finance is offered in lower amounts than you are able to get as equity finance, which means you may not be able to completely cover the costs you are budgeting for.

What Is Debit Finance: Final Thoughts

Debit finance is an excellent option for both new and established businesses as a way of raising capital for cash flow management or to cover the cost of starting up your business. It can be used in different ways depending on your needs and there are different types so you can choose the one that’s best for your business and makes you most comfortable as the owner.

The important thing to remember about debit finance is that it can be problematic if you don’t manage it carefully and know when repayments are due and that you can make those payments on time and in full month after month.

Guarantee that, use your funds raised wisely, and ensure you prioritise repayment, and any business can make the most of debit finance so long as it’s handled with responsibility.

The post What Is Debit Finance In Business? appeared first on Real Business.

A special type of trade finance, post-shipment finance refers to the financial assistance offered to exporters who are able to access working capital by securing loans against outstanding customer invoices. This cash injection from banks and other financial institutions can ensure a business can maintain business operations and on-going expenses in the time before invoices from international clients are settled.

For exporters shipping goods and services around the globe, a big challenge can be the amount of time between when products are delivered vs when they actually receive the payments. This cash flow timing gap can create financial strain and cash flow problems, especially when large shipments are involved, or when operational costs need covering before the various customer’s payments arrive. Post shipment finance is a financing solution that offers a way to help bridge this gap.

Read on to find out when and why it can be an option for your business and how it could benefit your international trade today.

What is post-shipment finance?

Post-shipment finance is a well-known type of trade financing. Here, exporters have access to working capital even while waiting for international customer payments on exported products and or services.

Typically, the loan covers the period from when your goods are shipped until you receive full payment from your international customer, however the actual time frames can differ between lenders. This is distinct from pre-shipment finance whereby a loan or advance is provided to fund the production or procurement of the actual goods to be shipped.

Post-shipment loans typically cover a significant amount of the invoice value, often around 80-90%, on the understanding that the repayment will be made once the buyer has settled the invoice for goods received.

What is the process for post-shipment finance in international trade?

Post-shipment finance may vary in loan amounts and type, but here are some common processes below:

• The exporter completes the shipping and compiles all required documentation to apply for a loan to cover the cost of goods shipped
• The bank prepares a loan offer in consideration of the proof of goods and or services sold to international customers.
• The loan amount may be equivalent to the full value of goods to be exported. You will be presented with varying options. NB: With higher loan offers, exporters should expect a higher interest rate.
• Expect time frames to last until you get payment from your international client. However, it may be longer on other occasions.
• The exporter pays back the loan upon receipt of payment from their customer.
• Sometimes, the exporter gets paid in just a few months, thereby settling their loan in a shorter time period.
• The exporter applies for another loan when the next export is organised.

This is a typical process so there will be variations according to your loan provider. Ensure that you understand the whole process and that you are aware of all expectations and obligations as a borrower before signing any contract or paperwork.

Expect a lot of administration work and tedious processing but once you get the financing, it will be worth it since you’ll have the funds you need to maintain business operations while waiting for customer payments to come in.

The different types of post-shipment finance

There are three main types of post-shipment finance that exporters can make use of, including:

1. Physical export

Physical export loans are assigned and grated to the exporter declared in the trade documents

2. Deemed export

Deemed export makes out the loan to the supplier of goods to designated agencies.

3. Capital goods and project export

Capital goods and project export assigns the loan to the international buyer but remits the funds to the domestic exporter.

Other types of finance are available, such as export bill discounting (where a draft bill of exchange is received from an importer, payable at a future date, and then sold to a financial institution for a discounted rate) but these three methods mentioned above are the most common types of post-shipment finance.

How post-shipment finance can help your export business

There are times when your international customers will choose the option to make payment only upon receipt of goods. This can present a great challenge on your cash flow and operational capital. This is where post-shipment finance can step in to relieve you of the financial burden while waiting for payments to come in. Your client also gains flexibility in making payments.

With post-shipment finance, there is less anxiety and stress and more peace of mind. You can just focus on the operation and growth of your business. More so, you won’t need to take out loans that require collateral just to get operational funding and your business will have improved cash flow.

Most important of all, you get a hold of essential funds to run your business and pay overhead costs, especially staff pay and other business expenses.

Who can make use of post-shipment finance?

Post-shipment credit is an option to support exporters, whether you have a small or large-scale business. Whatever your product or service, whether you are an individual exporter, a manufacturing exporter, an export house or an export agency, you can usually take out this type of financing. You will need to supply all the required documentation to apply for this type of international trade finance.

What documentation is needed to access a post-shipment loan?

We mentioned that banks and lenders will have their own unique processes and require different shipping documents and other paperwork, but most of them will ask you to provide a similar set of documentation which you need to submit in order to be considered for post-shipment finance.

Typically, this includes:

• Exporter details including accreditations, company records, registration papers and more
• Proof of Insurance or Certificate of Insurance
• Import-Export Certificate
• Commercial Invoice
• Packing List
• Inspection Certificate
• Airline/Shipping Invoice

Complete and compile all these basic documentary requirements gathered during the export process before you proceed with any post-shipment loan application.

Tips when it comes to taking out post-shipment finance

There are so many benefits to choosing post-shipment finance for your business but as with other loans, financing should only be considered when really needed due to the risks it carries.

Always ensure that your business has the capacity to make loan repayments as they become due and be certain that you are fully aware of the interest rates and how much total interest will be charged to the loan.

Conclusion

By understanding the requirements, processes and implications of post shipment finance options, exporters can make informed decisions about if and when they should use this financing option to aid their operations.

With careful and planned use, this finance tool can aid healthy cash flow and minimise financial stress for those exporters operating in international trade markets. There are other options to consider that can help avoid cash flow issues, such as prepayment finance or export bill discounting, or even export credit insurance (providing protection against the risk of non-payment by foreign buyers), and each has its own merits. A financial expert can help you decide whether post-shipment finance is the best option for your export business operations.

The post What Is Post-Shipment Finance & How Could It Help Your Exporting Business? appeared first on Real Business.

No matter how hard your management team works at improving your business strategies and structures, sometimes you need an expert, objective pair of eyes to look at your business operations from a different perspective. This is where business consulting services can be invaluable.

Business consultancy is a rather broad term for business specialists or consulting firms that offer professional advice, and generate customised strategies to assist in optimising your business on a range of different levels. So, what could a business consultant do for your business?

Here are just a few of the many benefits of using business and management consultancy firms:

Offer an outside perspective

The outside, more objective perspective that a business consultant can offer is one of the best reasons to hire one. It is expert advice offered by a true business professional, usually someone with a degree in business studies or equivalent who has qualifications from recognised industry bodies. Many will have been or still are entrepreneurs, and therefore more able to put themselves in your shoes and help you realise the best solutions to the issues facing your business.

Business consultants come with a wide range of industry expertise and are often able to offer much more than just strategic advice to help you enjoy business growth. While strategic thinking is a key overarching element to what an external consultant will provide, they’ll also be able to assist with other aspects including management consulting, business administration, human resources, marketing and cost savings.

This fresh perspective is geared towards business needs and goals in a particular sector. A consultancy firm will help businesses solve problems and boost productivity by making recommendations of changing various aspects of a business that those already involved in the work of the business were perhaps unable to identify .

Make better use of the resources you have available to you

You may have resources and talent sitting right in front of you, but it is going unnoticed. A business or strategy consultant will be able to assess the resources available to you and ensure that you are using them most effectively in an effort to save you time and money.

These resources could come in the form of equipment, assets, or even people. You may have staff members that have skills that you didn’t even know they possessed. Don’t allow any of your resources to be wasted if you want to meet your business goals.

Help set realistic goals and communicate these goals to employees

As a business owner, you need goals to work towards, and perhaps you have had the wrong business goals and milestones in place thus far. A business consultant will be able to assess your company’s goals as well as the goals for each department and even each employee.

Consultants have excellent communication skills and should be able to effectively communicate these goals to your team as well as help inspire and motivate them to reach them. Having clear, defined, practical goals (that perhaps come with an incentive) is a great way for everyone to be on the same page and work towards something bigger than themselves.

Save you money and time through more efficient processes

There may be a variety of processes and systems currently costing your business time and money. Because they have been in place for so long (or not), you may not even have considered changing or restructuring them. But a business consultant has a trained eye, and once they have gathered all the information they need, they’ll be able to identify where you may have been going wrong and suggest problem solving solutions.

From there, a consultant will be able to suggest sustainable ways in which you can make changes to any inefficient processes that have been costing you time and money. If, as a business owner, you’ve known about these inefficiencies for a while, they may have indirectly been causing you a lot of stress and anxiety, which you’ll now be able to wave goodbye to.

Make your business more attractive to your target customers

For a business to become as successful as possible, they need to appeal to their ideal target market. A business consultant will have knowledge of market trends in your industry sector and be able to identify ways to make your business more attractive to your target audience. This might include business aspects regarding branding, nailing your brand message, and improving aspects of your customer service.

Certain business consultants may have a marketing background and therefore be able to assist you with marketing elements, while others may refer you to a marketing specialist when it comes to rebranding, making your brand more attractive, or improving aspects of how you come across and deal with your customers.

Provide solutions for business expansions

Are you looking to expand your business? Many firms’ expansions can be very tricky logistically, and an expansion could be a risk that you’re not quite ready to take. A business consultant will be able to assess all the risks involved in your proposed expansion and help find solutions to the logistical issues that the expansion presents.

They’ll be able to identify areas in which the expansion can be done in the most effective way possible that causes little to no disturbance to other departments and the everyday running of your business. Essentially, they will be able to create a plan of action detailing what steps need to be taken to expand your business sustainably and successfully.

Business consulting service conclusions

Investing in a business consultancy service could be beneficial no matter where you are in your business journey. Start-ups, SMEs and large corporations all improve their businesses by working with business and management consultants on improving many different aspects of their business.

A business consultant will make solid recommendations for a business and may even be able to introduce you to other experts, such as marketing consultants, to improve other aspects of your business that require more specialist expertise.

Working with a consultant can be revolutionary for clients, many of whom are potentially working long hours just to stay afloat. That is why you should ensure that you take the time and care necessary to find an experienced and reliable business consultant, potentially one whose skills have been recommended by someone you trust or are highly rates by others in your industry.

The post What Can A Business Consultant Do For Your Business? appeared first on Real Business.

The industry in which your company conducts business activities changes your tax liabilities, potential for funding and grants, and the types of investors/stakeholders you attract. The official way of identifying this industry is through your standard industrial classification (SIC) code. Having the wrong SIC code can not only filter you out of official searches, but it also makes your administration skills look poor. If your company changes or expands into another industry, your company’s SIC code must also change.

But how do you change your company’s SIC code? In this article, Real Business will answer this very question, including how many SIC codes you can have, choosing the right SIC code and more.

How do you change your company’s SIC code?

You cannot change your standard industrial classification without some administrative work. If you make a mistake or expand into another industry, you must file a confirmation statement to change the code.

Confirmation statements are legal documents that confirm your company details, required by Companies House every 12 months. Part of those company details is at least one code (up to four in total). SIC codes are not unique, they are identifiers for specific industries shared amongst many organisations registered with Companies House.

If you’re looking for how to change SIC codes on Companies House, these are the only two ways to do it:

• Wait until the next due date – Wait until a whole 12 months have passed since your last confirmation statement, and include the desired standard industrial classification code.
• Early confirmation statement – You can pay a filing fee of £34 through online services and £62 for paper submissions to change it sooner.

Why would you need to change your SIC code?

Some may think that a standard industrial classification code is just a series of numbers on a data sheet, but it’s not – it’s used by Companies House, HMRC and government bodies to categorise your business activities, all whilst assigning statistics, tax liabilities and audits.

A wrong SIC code, then, can cause various problems. For example, if your company worked in petrochemical manufacturing but later changed industries to wholesale and retail trade, neglecting to change your SIC code could subject you to environmental levy checks or fuel duty audits.

Reasons you should change your SIC code are as follows:

1. Current code no longer reflects your business activities – If your business has evolved, having a wrong SIC code can mislead regulators and stakeholders.
2. Wrong SIC code during company formation – SIC codes are very specific, and some inexperienced companies choose the wrong SIC code without realising.
3. You added new service activities or products – Companies can use multiple SIC codes, up to four.
4. Discontinued business activities – If you’ve stopped business activities in certain industries, it’s best to remove SIC codes for said sectors, as it may confuse insurers, clients and government bodies.
5. You’re planning to apply for grants, funding or tenders tied to specific sectors – Public funding and tendering processes typically filter applicants based on SIC code.
6. Stopping compliance and regulation checks – Like the example above, if you’re stopped business activities in a sector with additional checks and balances, it’s best to remove the designation and replace with an appropriate SIC code.

How do I know what my new SIC code should be?

Selecting the correct UK standard industrial classification (SIC) code isn’t as easy as it may seem. Each code denotes specific business activities, such as “01210 – Growing of grapes”.

Finding your new SIC code can be done in several ways:

• Consult the official SIC Code list – Companies House provides a condensed list of SIC codes that are organised into 21 main industry categories.
• Utilise online SIC code lookup platforms – Many platforms offer search functionalities that can look up UK SIC codes by business activity, such as Osome’s free lookup service.
• Review similar/competitor company codes – All companies have competitors or industry leaders. Take a look at their Companies House page and cross-reference their code.
• Determine the number of SIC codes required – Think of the four main distinct activities your company engages in, and assign the appropriate codes.
• Seek professional advice – If you’re still uncertain, consult with a professional advisor, accountant or representative of Companies House to find the appropriate code.

What are the technical activities that require specific SIC codes?

These activities span a wide range of services in engineering, architecture, scientific research and consultancy. These fields require precise SIC codes, accurately representing a company’s economic activity.

Some examples of technical activity SIC codes include:

• (71122) – Engineering-related scientific and technical consulting activities
• (71111) – Architectural activities
• (71129) – Other engineering activities (not including testing and analysis)
• (71200) – Technical testing and analysis
• (72110) – Research and experimental development on biotechnology
• (72190) – Other research and experimental development on natural sciences and engineering
• (19201) – Mineral oil refining
• (19209) – Other treatment of petroleum products (excluding petrochemicals manufacture)
• (46711) – Wholesale of petroleum and petroleum products

What codes apply to public administration and extraterritorial organisations?

Companies that are involved in the aforementioned functions must use codes that reflect their governmental or international remit. They are typically reserved for government bodies, embassies and institutions that operate beyond domestic jurisdiction.

Applicable SIC codes include:

• (84110) General public administration activities – This covers executive and legislative functions, including fiscal administration, government policy formulation, and related oversight.
• (84120) Regulation of health care, education, cultural and other social services, not incl. social security – Used by public bodies managing regulatory oversight in education, health, and cultural services.
• (84130) Regulation of and contribution to more efficient operation of businesses – This applies to public bodies regulating commercial activity or supporting business infrastructure.
• (84210) Foreign affairs – Suitable for diplomatic services and bodies responsible for international relations.
• (84220) Defence activities – Covers military, defence, and national security services, including armed forces administration.
• (84230) Justice and judicial activities – Used by courts, tribunals, and legal enforcement agencies.
• (84240) Public order and safety activities – Suitable for police forces, fire services, and emergency planning bodies.
• (84300) Compulsory social security activities – This applies to national insurance and pension administration bodies.
• (99000) Activities of extraterritorial organisations and bodies – Used by embassies, consulates, international bodies (e.g. UN agencies), and other organisations operating outside UK domestic jurisdiction.

Conclusion

This should be all you need to know about changing your SIC code. A limited company has a lot of advantages that they have access to as a default, but a lot of it can be negated by having the wrong code.

FAQ – Can sole traders get a SIC code?

Typically, only companies can have SIC codes assigned to them, as Companies House only deals with legal and registered entities. A sole trader cannot have one assigned to them as a result. However, some sole traders may want a SIC code so that they can:

• Grants, fundings or loans – Some government bodies and financial institutions may require a SIC code.
• License or permit applications – Certain professionals or business activities necessitate specific licenses and permits.
• Statistical surveys – Organisations that conduct industry-related surveys may operate using SIC codes
• Insurance policies – Insurers may use your SIC code to determine coverage options.

Bear in mind that you will have nowhere to officially put this, considering SIC codes are primarily stored and searched for on the Companies House website.

FAQ – How do you check your company’s SIC code?

You can check your current SIC code on Companies House via the next simple steps:

1. Find your company – Go to the Companies House search page.
2. Locate your company – Type in your company name or registration number, and select your company from the search results.
3. Review company details – Your company’s overview page will have a “Nature of business (SIC)” section aligned left and lower on the page.

The post How To Change SIC Code On Companies House appeared first on Real Business.

The term “P11D form” is typically a catch-all term for the multiple documents required by HMRC for businesses or limited companies that grant benefits in kind or cover the expenses of their employees. HMRC uses these documents to calculate the amount of income tax the employee must pay and the amount of Class 1A national insurance contributions their employer must pay.

But what are the different types of P11D form, and how are they best filled out? In this article, Real Business outlines all you need to know about these forms, including their deadline, what counts as a taxable expense/benefit and more.

What are the different types of P11D form?

There are two primary P11D forms and two secondary P11D forms used for mistakes:

• P11D form – The main form in question required of an employer for every employee that have expenses and benefits paid (on items not exempt) to calculate income tax owed. They must be submitted on July 6th, following the end of the tax year.
• P11D (b) form – Employers are required to report how much in total Class 1A national insurance contributions they owe as a result of all employment-related benefits and expenses given to employees. It must be paid by July 22nd after the tax year.
• P11D (and/or P11D b) amendment form – This is effectively the same form as either a P11D or P11D b form, the only difference being that this one will be marked with “amendment”.

The standard P11D form, when completed, must be copied and given to an employee. This is especially true if they are self-employed, as this affects their self-assessment tax return.

What goes onto a P11D form?

The truth is, what counts as expenses and benefits can be confusing due to the rules regarding exemptions. This section will help outline what counts and what does not. Bear in mind that if you add exempt benefits or expenses by mistake, HMRC will have you pay tax for them regardless.

What counts as a taxable benefit?

A taxable benefit, also known as a benefit in kind, is a non-cash reward or perk provided to an employee by an employer. The benefits paid must have personal value for it to count, meaning it’s not going to be wholly used for business.

Common examples are:

• Company cars – Cars that are given to employees to use both on private and business time.
• Fuel – Fuel that gives access to more.
• Private healthcare – Health insurance covering dental or medical coverage.
• Interest-free loans – Beneficial loans of over £10,000 qualify.
• Living accommodation – If a residence is given rent-free or below its market value.
• Assets transferred – Assets transferred, such as laptops, etc.
• Non-business travel or entertainment – Such as via rail season tickets. This does not include work purpose travel.
• Home telephone bills – This can also be extended to telephone services.
• Professional fees or subscriptions – The body in question cannot be part of HMRC’s pre-approved list of professional bodies.
• Gym memberships – Provided as a perk.
• Childcare – Costs towards childcare outside of tax-free schemes and exemption thresholds.
• Holiday accommodation – Even if the company owns the property, it’s considered a benefit in kind.

What counts as business expenses?

You must report expenses paid on behalf of, or reimbursed to, employees so long as they are not exempt under HMRC rules. There is a lot of crossover with benefits:

• Business travel or subsistence costs – In instances where there’s an element of private use.
• Mileage allowance – Above HMRC’s approved rates.
• Home telephone bill – Unless it’s split from private use.
• Professional fees or subscriptions to non-approved bodies – Such as gym memberships, magazines, coaching, etc.
• Training courses – So long as they are not directly related to the employee’s current duties.
• Relocation expenses – So long as the expenses are above the £8,000 tax-free threshold.
• Season ticket loans – Used in part for non-business travel.
• Living accommodation – Living accommodations or holiday homes provided for personal use.
• Private healthcare – Any healthcare not covered by a salary sacrifice arrangement.
• Assets transferred – Self-explanatory.
• Beneficial loans – Like interest-free loans over £10,000.

How do you identify exempt expenses and benefits?

To support business growth efficiently and encourage public-policy goals, certain benefits are made exempt from tax relief, meaning they are not to be added to the P11D form. The only surefire way to know whether something is exempt or not is to check Gov.uk’s list of exemptions.

How do you complete a P11D form?

P11D forms can be completed online via the HMRC app or through supported payroll software. The following is a step-by-step guide:

1. Fill the form – The following details are required:
   • Employee name and national insurance number
   • The types of expenses and benefits provided
   • Relevant start and end dates
   • Cash equivalent or market value of all benefits
   • Contributions made by the employee
2. Use submission tools – Either by using the HMRC’s online services or by using the payroll software that supports P11D reporting.
3. Calculate benefit value – Each benefit has its method of valuation. Check Gov.uk guidelines for a comprehensive breakdown.
4. Maintain accurate information – Embody good data collection practices. Keep all receipts, contracts, usage logs and benefit agreements for at least three years after the end of the tax year, just in case HMRC requires cross-referencing.

What happens after a P11D form submission?

After submitting your P11D form, HMRC will:

• Employee tax code – HMRC will update the tax code to collect extra income through PAYE.
• Employer pays Class 1A national insurance contributions – Based on the total cash equivalent of reported benefits.
• Employee may owe tax through self-assessment – This only applies if they are a director, high earner or have a reason to submit a tax return (such as being self-employed outside of employment with you).
• HMRC may conduct reviews – HMRC may follow up on the submission by asking for evidence.

What are some mistakes to avoid making on a P11D form?

Here are some of the most common mistakes that you should try to avoid when making P11D forms:

• Forgetting to include salary sacrifice agreements – A salary sacrifice agreement is a pact between the employer and employee, where benefits are given in exchange for a reduced salary. For most benefits, this is straightforward, but other benefits in kind have stipulations (such as having to report the greater between a company car’s normal cash equivalent or the amount of salary sacrificed).
• Omitting non-cash benefits – Items such as assets that have been transferred, holiday venues or healthcare should always be applied.
• Reporting exempt benefits – If the benefit in question is exempt, there is no need to add it.
• Failing to submit a P11D B – If even a single employee is due a benefit in kind, then Class 1a national insurance contributions are due via a P11D B.
• Incorrect cash value – Don’t use estimates, abide purely by HMRC rules when evaluating benefits in kind. Each benefit has its method. A common error made, though, is subtracting employee contributions from the value.
• Missing the 6th of July deadline – If you miss the deadline without a good reason (such as a last-minute change because of a HMRC change), then you will almost always receive a penalty, with interest being applied for continuous lateness.
• Not giving employees a copy – Always give your employees a copy of their individual P11D.
• Incorrect or inconsistent data – Mismatches between payroll and submitted forms.

Conclusion

All employers who give out benefits or cover expenses outside of exempt categories must always submit a P11D. Ensure that you have a strong data collection policy to ensure no mistakes are made, as these can similarly lead to penalties.

The post What Is A P11D Form? appeared first on Real Business.

A unique taxpayer reference (UTR) number is given out to businesses that register for self-assessment tax returns or organisations that register as a limited company. This ten-digit code is needed and used by both the organisation in question and by HMRC, as it’s an essential element in preventing errors. Typically, your UTR will not change, at least not outside of very specific circumstances.

But what are these circumstances? In this article, Real Business outlines the answer to this question, as well as what happens when you use the wrong UTR number, how to find it, and more.

What are the circumstances in which your UTR number changes?

When you get a UTR number, HMRC intends for you to keep it permanently. It’s designed this way to keep things stable and streamlined despite any event that could otherwise confuse these matters, such as relocating. If you could change your unique taxpayer reference number at will, that could cause confusion with your tax account matters.

However, as previously stated, there are instances in which your UTR number can change. Such as:

• Identity theft – It is not unheard of for unscrupulous individuals to file false self-assessment tax returns or claim refunds with another’s unique taxpayer reference number. In the event of this happening, HMRC will cancel the compromised number and issue a new one to you. All official records, such as your previous tax returns, will be retained and transferred over.
• Duplicate UTR numbers – If a new business or limited company is given a unique taxpayer reference number that is the same as another organisation’s without realising, they will consolidate records and cancel one UTR number, providing another in its stead.
• Change in legal business structure – This is a technicality. If you were to change your business model from a sole trader to a limited company, the separate legal entity would gain a new, unique taxpayer reference number. This means that you’d be using a different UTR for the company tax return, and your “own business” UTR for separate dealings.
• Serious HMRC administrative error – Possibly the rarest case in this list, but if HMRC makes a foundational error regarding how your UTR number is issued (such as being linked to the wrong national insurance number).
• Closure of a tax account by HMRC – If a taxpayer is rendered unable to generate tax bills for any reason, such as being declared dead or incarcerated, HMRC may deactivate the UTR number.
• Mergers or acquisitions – If a limited company merges, or is absorbed into, another company, then its UTR number may be closed, and all tax responsibilities transferred to a different one.

When is a UTR number used?

Your unique taxpayer reference number is a mandatory part of the following actions:

• Filing a tax return – Individuals must use their personal UTR number on their self-assessment return (SA100), and companies must use their UTR to file a company tax return.
• Paying your tax bill – HMRC requires you to use your UTR number as a payment reference when you pay via bank transfer, online transfer or a cheque. The correct format can be found on your tax statement.
• Receiving payment reminders and notices – HMRC uses UTR to send notices to file returns, tax calculations, payment reminders and late payment penalty letters.
• HMRC communication – Whether you’re contacting HMRC via HMRC’s self-assessment helpline, the HMRC app or via post, you will need a UTR number to confirm your identity. Failure to give it over can lead to delayed access by confirming via an alternate security method.
• Using a personal tax account or HMRC app – When logging into your tax account, your UTR is required for reviewing previous tax returns, current tax bill and payment history.
• Working with an accountant or tax agent – Your accountant or tax advisor will require your UTR number to do your tax duties. They will be barred without it.
• Claiming tax reliefs, rebates or refunds – Claiming for the following will require a UTR number:
  • Work-related expenses
  • Pension contributions
  • Charitable donations
  • Business mileage
• Proving income – UTR numbers are often required when you must prove income for larger-scale investments/purchases, such as mortgages, loans, visas, etc.
• Past or ongoing investigations, appeals or corrections – If HMRC opens an enquiry or challenges a tax decision, your UTR number will be the main form of correspondence tracing.

What happens if you use the wrong UTR number?

Making a mistake and using the wrong UTR number can completely disrupt HMRC’s functions, resulting in delays or financial penalties. In detail:

• HMRC can’t match your self-assessment tax return or payment – HMRC may be unable to link your self-assessment to your account, risking being labelled under a “non-filing” or “non-payment” status. This, of course, leads to penalties due to the failure of the return or payment reminders.
• Delays in processing – Even if HMRC can link your UTR number to your account, the discrepancy may be enough to place it in a queue for manual review. This delay could set you over the deadline.
• Data may be applied to the wrong account – If the incorrect UTR number you input belongs to another account, then your tax return may end up credited to them. This can lead to double reporting for them and missing records for you.
• Risk of checks/investigations – Consistent mismatches and errors involving the wrong UTR could trigger an investigation, as HMRC could consider it indicative of fraud or negligence.
• Accountant or agent errors – If your trusted agents or accountants use the wrong UTR number, you will still be held legally responsible.

If you realise you’ve used the wrong UTR number, contact HMRC immediately to rectify the issue. Alongside the correct number, ensure you have your national insurance number, proof of income (or other documents), and copies of the original return/payment.

Where do I find my UTR number?

Your UTR number can be found in several official places:

1. HMRC app – The easiest, surefire way to get access to your UTR number is through the official app.
2. HMRC welcome letter – When you first register for self-assessment tax returns or a limited company, you will get a UTR number in the post.
3. Self-assessment notices and reminders – HMRC references your number in an official use capacity.
4. Online tax account – Your online tax account on Gov.uk will display your UTR number in the “self-assessment” category.
5. Previous self-assessment tax returns – Also known as SA100 forms, your UTR will be listed on these documents.

What happens if I don’t keep my UTR number safe?

There are several concerning statistics revolving around fraud using UTR numbers. Fraudsters impersonate taxpayers to gain access to HMRC systems using minimal identifying information. With that, they can:

• Create fake self-assessment accounts
• Submit false tax returns
• Claim illegitimate tax returns
• Divert payments to their bank accounts

The stats on scam statistics involving UTR numbers are as follows:

• Self-assessment rebate scams – In the 12 months to January 2024, 207,800 suspicious contacts were reported to HMRC and 79,000 (38%) involved self-assessment rebate scams, which worked by redirecting refunds by changing bank details in the account.
• Scam referrals – Between 2023 and 2024, over 144,298 scam referrals were recorded, half of which targeted self-assessment users.
• Government gateway breach – NI and UTR numbers were stolen during a government gateway breach and were used to file false self-assessment tax returns. Although many were blocked, around £47 million in total was stolen. Accounts were locked.
• Prevented scams – HMRC blocked around £1.9 billion in fraudulent claims in the same year.

How do I keep my UTR number safe?

The following are some effective measures to keep your UTR number safe:

1. Never share your UTR number publicly – Do not post your UTR number online, or include it within public documents.
2. Share only with associated professionals – HMRC, authorised tax agents, and, of course, your accountant.
3. Watch for phishing attempts – HMRC never asks for UTRs via unsolicited emails or texts. Always check the email address of any email asking for personal information for confirmation, and only ever communicate such over secure channels.
4. Keep tax documents locked or encrypted – Many files have protection measures, such as Adobe Acrobat, Microsoft Word and more.
5. Report suspected misuse – If you receive correspondence that hints that your UTR has been used fraudulently, report it immediately.
6. Use secure channels when submitting your UTR number – Only use it on official HMRC platforms or secure accounting software.

Conclusion

Overall, your UTR number will likely never change unless there’s an error. This is for consistency and reliability. In the event the UTR number changes, HMRC will send you an official letter with the new number and the reason it was changed.

FAQ – Can a UTR number change before self assessment tax return deadline triggers late penalties?

Yes, it will. HMRC has a no-tolerance rule when it comes to deadlines that encompass all late filings. However, they also have an appeals system. If the UTR number change is close to the deadline, and the late filing was not too far over the line, chances are that they’ll waive the late registration fee. That being said, you will need to ensure you have the correct information on hand.

FAQ – Can I request to get a UTR number changed?

No, you cannot request to have HMRC change your UTR number. That would pose too many risks for HMRC, such as data fragmentation, opening the possibility of fraud, or creating duplicate records. UTR numbers are intrinsically designed to be permanent, and it remains up to HMRC to make the changes.

FAQ – Do I need to register for self-assessment again if my unique taxpayer reference number changes?

No. HMRC simply transfers all of your data when you get a UTR number changed. There is no need to register for self-assessment again.

Instead, focus on updating your records with your new UTR number. Tell your accountant or your tax agent that they’ll need to update their authorisation with the new code, and make a final check on your HMRC account that the number has been successfully changed. You can always contact HMRC’s self-assessment helpline if you’re unsure.

FAQ – What happens if I stop being self-employed?

The only thing you need to do if you’ve stopped trading as a self-employed individual is to contact HMRC. Use your personal account or contact the helpline to stop all future self-assessment notices and possible late filing penalties.

Your UTR number will remain active, it stays on record until you are deceased. If you return to being self-employed, all you need to do is return to using the code.

The post Does Your UTR (Unique Taxpayer Reference) Number Change? appeared first on Real Business.

P11Ds is another tax form in the business world that is reviewed by the HMRC to calculate whether additional or less income tax is owed for taxable benefits or reimbursed expenses of each member of a company. Like all things with HMRC, there is a deadline that is non-negotiable, and failure to do so breaches PAYE regulations, exposing you to compliance enforcement.

But what is the deadline? In this article, Real Business outlines this very question, as well as what counts as taxable benefits and expenses, the best practices for compliance and more.

When is my P11D deadline?

Employers must submit two separate kinds of P11D forms per employee, and both have a deadline of July 6th. This date remains unchanged regardless of the tax year and will continue unless HMRC decides otherwise. All submissions must be made online, as paper submissions are no longer permitted.

What types of P11Ds exist?

There are four types, and all adhere to the same P11D deadline:

• 1/4 Form P11D – Employers fill these out to report expenses and benefits that are taxable by HMRC. Report benefits in kind by itemising them, marking each with the cash equivalent value. Taxable expenses (meaning expenses made purely for the business) must also be listed here, unless they are within HMRC’s exempt or approved categories. P11Ds are filled out by listing the employer and employee details in the header, laying out the taxable expenses and benefits across 14 sections, and putting down a footer/declaration.These 14 sections outline the articles covered:
  • A – Assets transferred to the employee.
  • B – Payments made on the employee’s behalf.
  • C – Credit cards and vouchers.
  • D – Living accommodation.
  • E – Mileage allowance payments that are not taxed at source.
  • F – Company cars and fuel.
  • G – Company vans.
  • H – Beneficial loans (over £10,000).
  • I – Private medical treatment or insurance.
  • J – Qualifying relocation expenses.
  • K – Services supplied (e.g., employer‐provided gym).
  • L – Assets placed at the employee’s disposal (e.g., laptops).
  • M – Other items (subscriptions, professional fees).
  • N – Expense payments made to or on behalf of the employee.

• 2/4 Form P11D (b) – This form declares the class 1a national insurance contributions (NICs) due on all benefits reported via P11D forms. The header, employee details, and contact details must all be filled out before being followed by the total cash equivalent value of all benefits and expenses, then multiplied by 15%.

• 3+4/4 P11D (and B) correction form – If you make a mistake during a submission, you are expected to use a correction form to amend it. There are two types of correction forms depending on whether you’re correcting a P11D or P11D (b).

What are the consequences of missing the P11D deadline?

There are several consequences for missing the deadline:

• Late filing penalties – Failing to file on time will incur a £100 penalty charge for every 50 employees who receive benefits in kind. This charge is applied against for every month until the form has been submitted.
• Late payment interest charges – Payment of Class 1a NICs is due by the 19th of July for cheques and the 22nd of July when paid electronically. However, when late, these payments incur interest charges at an 8.25% per annum rate (as of mid-2025).

How do you gather relevant data for the P11D deadline?

Ahead of the P11Ds deadline, you should have almost all the relevant details at hand through your database. You can find the definitive information by following the steps outlined below.

Identify eligible P11D employees

All benefits in kind, as well as certain expenses that can be claimed, should be logged in your payroll software. Through that, you should tally up eligible employees by:

1. List all employees and directors – Start with a full payroll headcount, including directors and any office holders. Have this listed exported from your payroll software or HR system. Filter the list to everyone who, throughout the tax year, may have received a benefit in kind or expense payments that have not been covered by HMRC’s approved flat rates.
2. Exclude payroll benefits – If you have voluntarily registered for “payroll benefits” with HMRC, note that any benefits fully taxed through HMRC’s Paye online service should be excluded from a P11D. Payrolls partially paid should have the payroll portion recorded.
3. Check PAYE settlement agreements (PSAs) and exemptions – If the stated expenses and benefits are exempt via a PSA (such as occasional staff social functions), or meet the HMRC exemption status, dismiss them from the form.

Build and maintain a centralised “expenses and benefits” register throughout the year

A business owner can only know whether an employee has expenses and benefits if reliable procedures are in place to capture them. Having a single live document that you can update with reportable benefits and expenses acquired by employees from the beginning to the end of the tax year solves this issue and ensures you’re not scrambling to meet the P11D deadline.

This can be done via the following:

1. Create a master register template – Create a spreadsheet that has the following entries:
   • Employee name and NI number
   • The type of benefit/expense
   • The start and end date
   • How much does it cost the company
   • How much is reimbursed
   • Amount reimbursed by the employee
   • Source reference (invoice, contract, etc.)
2. Mandate that all benefits and expenses require authorisation – This is already likely the case, but if employers give managerial roles the power to distribute benefits in kind and expenses, ensure that they must check for authorisation and mark down the details of the transaction via the sheet.
3. Update in real time – Put it into policy that whenever expenses and benefits are given out, it is to be logged in the sheet. Never wait till the end of the tax year, as this is not only time-consuming but also risks missing important articles.
4. Use consistent sources – Monitor and pull data from payroll reports, HR allocations, finance systems and manager confirmations.
5. Review monthly or quarterly – Check the register against both payroll and finance records to catch missing or duplicated entries. Also, ensure that when the P11D deadline is approaching, you perform a thorough cross-reference.
6. Lock for filing in June – Freeze the register by mid-June, and reserve it to complete both the P11d and P11d B forms. After it is done, unlock it again.

Conclusion

The P11d deadline is not as critical as actually having the correct data on hand in preparation. Utilise company policy to mandate tracking via data for the most streamlined process.

FAQ – What are examples of expenses?

For clarity, the following are examples of what could qualify as exempt:

• Expenses – There are three types of expenses in the business, however, only taxable expenses are to be reported:
  • Taxable expenses – These are paid to or on behalf of an employee, and are not exempt and therefore could be taxable. Examples include train fare from home to work, reward holiday flights and private mobile phone bills. Each of these is not exclusively business-related.
  • Exempt expenses – Do not report exempt expenses as HMRC will tax them if you put them on the P11D. HMRC exemptions include all items that are wholly and exclusively necessary for the job, and not everyday wear.
  • Reimbursed expenses – These cover transactions covered by the employee and claimed back later. The list is more of a grey area, as many articles have allowable parameters, whereas others are taxable. Consult a reimbursed expense list to ensure compliance.

The post What Is The P11D Deadline For Payments? appeared first on Real Business.

Alternatively called a ready-made company, an off-the-shelf company is a pre-made company formed and registered with Companies House but has never traded. It is much like a new car, ready to be sold and instantly used. But it’s not quite as simple as handing over a deed upon bank transfer, as a company comes with a lot of moving parts.

But what are the benefits of buying a shelf company? In this article, Real Business will outline what makes a ready-made company so appealing, how one is purchased, and the fine print surrounding the deed.

Why buy a shelf company?

Why not simply create your own custom limited company instead of buying one from somebody? Typically, people who buy shelf companies have a plan or have advantages to take that going through company formation would hinder, such as:

• Time – Company formation takes time. People who want to execute their plan as soon as possible aren’t going to concern themselves with having a bespoke company. If there are details they dislike, they can usually change it at a later time.
• Age requirements – Some financial products or sectors require the limited company to be of a certain age, usually to reduce fraud risk. Since off-the-shelf companies can be “shelved” for any period of time, this counts as a bypass for many of these limitations. Companies created, held, and later sold are named “dormant companies”, a subcategory of a shelf company.
• Instant documentation – Buying a shelf company means it comes complete with a certificate of incorporation, company number and electronic filing access in a matter of hours, whereas normal formation would take days.
• Anonymity – There is a time gap, which can often be delayed, between gaining control and registering a new director’s details. It’s worthwhile pointing out, of course, that this is considered shady and may even violate anti-money laundering laws.
• Perceived credibility – An older company is seen as being more established to clients, lenders or suppliers – even if there’s no trading history to scrutinise. It sounds strange, but it works in practice – they see age and, conversely, increased credibility, but no past transactions, debts or disputes.

Shelf companies are typically purchased by:

• Entrepreneurs and startups – Individuals wanting to expedite business setup and immediately start trading.
• Business pursuing credibility – Companies that want to present an established presence, having an older company can help enhance trust.
• Entities requiring quick market entry – The process of buying a shelf company finalises within a couple of hours, allowing organisations to secure contracts or pounce on opportunities immediately.

How do you purchase an off-the-shelf company?

The following is a step-by-step guide to purchasing shelf companies, from browsing to finalising:

1. Find a shelf company seller – A shelf company seller are businesses that create, maintain and hold pre-registered companies to sell them later. The most common examples for UK companies include 1st Formations, Rapid Formations, and Companies Made Simple.
2. Select and purchase – Ready-made companies range from brand new companies to vintage companies. Older ones tend to be more expensive, and prices range between £100 to £1,000+.
3. Provide information – You will be asked to submit, after paying, your full name, residential address, nationality, DoB and proof of identity/address.
4. Transfer of ownership – The company formation agent will remove the nominee director and appoint you as the new one, then they’ll transfer shares to you as the new shareholder – all on your behalf.
   • Optional features – There are several changes you can request, such as a company name change, SIC code change, adding a new service address and registered office address, or requesting help with VAT or PAYE registration.
5. Receive documentation – These include the certificate of incorporation, share certificate, memorandum & articles of association, board meeting minutes and Companies House filing confirmation.
6. Start trading – Once the updates are processed by Companies House, you can open a business bank account and begin trading.

What comes with a shelf company?

A shelf company comes with various features, although not all sellers offer the full range:

• Pre-registered at Companies House – The several-day-long process of company formation is skipped entirely.
• Documentation – You are given a certificate of incorporation that includes company details, such as a registered office address and service address.
• No trading history – Having no history is more beneficial than having a bad history, as the presence of debts and other liabilities is a black mark.
• Single director appointed – These companies are set up with a nominee director, with the new director’s details to be added on purchase.
• Company name change service – Most dormant companies can have their company name changed right away.
• Electronic filing access and online admin portal – The Companies House account is handed over, allowing access to the online portal.
• Generic SIC code – Usually a placeholder SIC code that needs to be changed.
• Share structure – Most shelf companies formed come with one ordinary share issued to a nominee shareholder.
• Board meeting minutes applied – Typically, they come with templated minutes of a board meeting authorising the share transfer and appointment of new directors.
• Transfer shares – Share transfer documents are also included, often signed and dated to allow immediate change of ownership.
• Public register presence – The company already exists, and its details (including date of incorporation and current officers) are visible on the public register at Companies House.

What are the downsides to buying a shelf company?

Buying a shelf company isn’t for everyone. If the previous two sections haven’t convinced you, we’d recommend you form a new company via Companies House. But if you’re on the fence, consider the following downsides:

• Higher cost – Shelf companies are more expensive than new company formations. The value must outweigh both the age and the swift delivery of the shelf company purchase.
• Generic setup – They are generic companies in name, details and directors – all requiring updating.
• Potential for hidden liabilities – Vintage companies may carry overdue confirmation statements, or other requirements if it has not been properly maintained by the company formation agent.
• Compliance and verification – You can’t skip all the administrative work; you still must pass anti-money laundering checks, submit new information and apply for a business bank account.
• Possible reputation concerns – Whilst shelf companies aren’t malicious by default, new and ready-made companies have a history of being used for fraud, which may raise some eyebrows with banks, suppliers or HMRC.

Who should handle your ready-made company?

When buying a shelf company, you have two routes. You either handle all updates and transfers yourself or you hire a registration agent. There are pros and cons to both:

• Speed and simplicity – Registration agents do all the administrative stuff for you, to your instruction. Without them, you’d have to do director appointments, share transfers, SIC code updates, and more.
• Risk and accuracy – Documents are pre-prepared and always legally compliant. Registration agents do this for a living, meaning they have professional standards. If you DIY, there’s a higher chance of errors in share transfers and confirmation statements occurring that may lead to rejection or penalties.
• Access to extras – Registration agents are often bundled with a registered office address, service address, VAT registration number setup and access to online portals. This is convenient unless you can easily source and manage them independently.
• Hidden costs – You may be charged with additional fees for each add on, like changing the company name or adding shareholder information.
• ID verification – You will still have to provide ID for anti-money laundering checks before processing the sale, this step may make some uncomfortable.

Conclusion

Overall, a shelf company is mainly purchased due to its age and speedy company formation process. If these traits are not ideal or required, there’s little reason to go through the process. If you’re converting to or creating a limited company for the first time, it may be better to experience the transference in full.

FAQ – What is the difference between a shelf company and a shell company?

Shelf companies have been explored in-depth throughout this article, but the similarities between these two entities is simply in the name.

A shell company:

• Paper existence – Its existence in the practical world is limited, with no significant assets, operations or employees.
• Used – Shell companies are often used for mergers, holding assets and restructuring. That being said, they are also used for fraud, tax evasion and money laundering.
• Activity – It may or may not have trading activity.
• Range in age – A new shell company has limited use and is often made dormant to build value.
• No trust – HMRC and financial regulators dislike and distrust shell companies due to their fraudulent track records.

FAQ – Why do law firms use shelf companies?

There are several reasons that law firms are typically the ones using off-the-shelf companies:

• Speed – Law firms may need to set up a client’s business structure quickly.
• Pre-approved structure – Shelf companies come with standardised documentation that makes it easy to adapt for trusts, holding companies and SPVs.
• Confidential – Shelf companies allow ownership transfers without revealing client identity.
• Historic incorporation date – Older companies can bid on contracts and settle disputes more easily.
• Asset protection – Shelf companies are used in tax planning and asset ring fencing strategies, especially in group structures or succession planning.
• Client requests – Some clients specifically request a shelf company for speed, privacy and strategy.

The post What Is An Off-The-Shelf Company? appeared first on Real Business.

Converting a business to a company comes with a host of advantages, and many of those advantages come in the form of stability, regulatory compliance and trust. A certificate of good standing is an official document that acts as a full-blown mark of approval in these areas.

But what is a certificate of good standing, and how do you get one? In RealBusiness, we will outline exactly this, as well as what it can do for your company, who may need it and more.

Understanding What A Certificate Of Good Standing Is

A certificate of good standing is an official document issued by Companies House to prove that a company legitimately exists and has become eligible for this status. To achieve this, the company needs to have done the following:

1. Become incorporated – This means your company has completed the incorporation process and become a UK company.
2. Directors – It has the correct number of company directors (a PLC requires at least two directors).
3. Completed filing – It has all annual accounts and confirmation statements filed.
4. Office address – It has a registered office address that is valid and active.

A certificate of good standing is made up of the following company details:

1. Company name – The name that you’ve chosen for your company.
2. Company number – A unique identification number issued during incorporation.
3. Date of incorporation – This confirms how long the company has had a continuous unbroken existence.
4. Statement of good standing – It confirms all of the points in the previous section.

You can get a certificate of good standing by doing the following:

1. Submit request – Submit a request online via companies house’s website. You can also request by post, but it’s much slower.
2. Pay the fee – Prices are as follows:
   • Standard – A standard costs £15 and takes five working days to arrive.
   • Express service – Express service costs £50, and you can get the certificate of good standing the same day if ordered before 11AM.
3. Receive the certification – You will get it as a paper document.

What can a certificate of good standing do?

The document proves several things about your company:

• Validity – It is legally valid.
• Uninterrupted existence – This proves the company is healthy enough – having never been dissolved, failed to meet statutory filing requirements and legal obligations, and is not entered liquidation/administration.
• Compliant – The company is fully compliant with UK regulations.
• Complete filing – It has filed both confirmation statements and annual accounts.
• Directors – It has the correct number of directors.
• Address – It has a registered office address.

All of these traits give confidence to business partners, banks and regulators.

What optional details can you include in a certificate of good standing?

When you request a certificate of good standing from companies house, you can choose whether or not to include specific details within for various reasons. The more company information you include, the more informed anyone who verifies the certificate of good standing will be. But this may require keeping said information updated, or it could clue them in to an element they dislike (such as certain shareholders being too powerful).

These details are:

1. Company’s registered office address – The official address on public record, and where the company is legally based.
2. Directors names – You can choose whether or not to make the director names public. When trading overseas, authorities may want to confirm a natural person holds dictatorship.
3. Statement of capital – This outlines and confirms the capital structure, giving people an idea of the scale of ownership, verification of financial structure and more. It breaks things down into the following:
   • Class of shares – This refers to the types of shares issued by the company, such as:
     • Ordinary shares – Standard shares with equal voting rights and dividends.
     • Preference shares – Often feature fixed dividends and are given higher priority in the event of liquidation.
     • Redeemable shares – These can be bought back by the company at a future date. Each class may have different rights attached – voting, dividend or return of capital.
   • Number of shares issued – Total shares that have been allocated to shareholders.
   • Nominal value per share – The face value of each share (e.g. £1 per share).
   • Total nominal value – Aggregate value of all issued shares (e.g 100 shares at £1 = £100).
   • Currency – GBP, typically.
4. Shareholder information – Names of shareholders can be added if required, but it will remain valid only as a snapshot of the date, meaning it may need to be brought up to date in the event of shareholders leaving.
5. Company’s objects – The stated business purposes from the memorandum of association.
6. Statement of significant control (PSC) – Identifies the individuals, or entities, that have major influence over the company. This will give a full window into the powers of the company itself.

How does a certificate of good standing help with international trade?

It doesn’t. A certificate of good standing only denotes that the UK government recognises a company, and in most cases, it won’t be enough for most cases with foreign jurisdictions – although private companies may make an exception.

Nonetheless, there is a way around this – making your document an apostilled certificate. You can do so by sending your certificate of good standing to the UK Foreign, Commonwealth and Development Office and submit your apostille application online.

This will give your certificate the following:

1. Widened recognition – An apostilled certificate of good standing doesn’t change the contents, it serves as a government-level stamp of approval.
2. Allows trade overseas – Foreign authorities in Hague Convention countries accept it fully.
3. Prevents forgery – Apostillisation means that the government has checked and authorised it, reducing fraud risk significantly.

Foreign companies and overseas regulators in the Hague Convention view an apostilled certificate of good standing favourably, as it confirms your company has the valid pre-requisites to do business.

It enables the following:

1. Open overseas business bank account – Foreign banks often demand a certificate of good standing to confirm your company is legally registered and active in the UK.
2. Register with foreign authorities – Some countries require a certificate before allowing local branch establishments, applications for trading licenses and tax registration.
3. Enter contracts with foreign companies – Overseas partners may ask for it to prove your legal status.
4. Foreign regulatory obligations – Overseas regulators use it during the due diligence process for easy confirmation of the company’s existence, governance and compliance.
5. Meet customs and compliance – When declaring goods, applying for import/export permits or verifying ownership, a certificate of good standing does half the work.

What is the Hague Convention and its countries?

The Hague Convention refers to the 5th of October 1961 convention that took place in Hague, where the 120 country-wide international treaty simplified their overseas trade verification process via the “Abolishment Requirement of Legalisation for Foreign Public Documents”.

The simplification was the government-level mark of approval known as apostillisation. Although there are too many countries to go through, the top ten countries in GDP that signed this convention are:

1. United States
2. China(Mainland China joined in 2023)
3. Japan
4. Germany
5. United Kingdom
6. France
7. India
8. Italy
9. South Korea
10. Canada

Conclusion

In the end, a certificate of good standing is a mark of honour amongst UK businesses, but requires apostillation if the company’s operations ever expand overseas. Once you have it, though, you’ll find that Hague Convention countries will simplify most of your foreign business dealings and streamline your company’s growth.

The post What Is A Certificate Of Good Standing & How Do I Get One? appeared first on Real Business.