Choosing to form a limited company is an important step for any small business owner. But what are the duties and responsibilities of a limited company director?
Let’s take a look.
Why choose a limited company?
A limited company offers various business advantages. For example, it’s a great way to make your enterprise more tax-efficient – and offers boosted credibility as well as coming with the benefit of limited liability.
However, the role of limited company director is more admin-heavy than being a sole trader.
What are the duties and responsibilities of a limited company director?
A limited company director has various financial, legal and administrative responsibilities. Even if the director hires someone to perform duties on their behalf (such as a limited company accountant or office manager), it is still the legal duty of the director to uphold these responsibilities.
Essentially, a limited company director is legally responsible for the management of their company and its success. This includes relationships with shareholders, employees, trading partners and the Government. The Articles of Association – which all directors sign when the limited company is established – set out these operational rules and conduct codes which must be upheld by the director.
Further, a limited company director is responsible for ensuring that Companies House (the registry for limited companies in the UK) and HMRC have accurate and up-to-date information about the company and its stakeholders. Also, accounts and reports must be submitted on time, or the company will incur financial penalties.
The main reporting duties of a limited company director are as follows:
- Year-end accounts – the company’s annual accounts must be submitted to Companies House nine months after your company’s financial year ends.
- Confirmation statement – at least once a year (or whenever there is any change) you’re obliged to submit a confirmation statement to Companies House to confirm the directors and shareholders details, address of your company, and details of any Persons with Significant Control (PSC).
- Submit first set of accounts to Companies House
- Allotment of shares – if you change your share allotment or distribution, you must let Companies House know.
- Corporation tax – you must report any corporation tax owed and make a payment to HMRC annually.
- Company tax return – must be submitted annually to HMRC.
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Paying yourself and your employees
As director, you must ensure the company is registered as an employer with HMRC in order to pay a salary to yourself and any employees. This includes if you’re using subcontractors, for example for construction work.
You must also ensure income tax and NI contributions are taken from any salaries paid and given to HMRC along with employer’s NI contributions each year.
As a limited company director, you can benefit from tax-efficient dividend payments. To pay any dividends you must hold directors meeting to declare the dividend. This meeting must be minuted, and you must create a dividend voucher. These vouchers will be used by shareholders to complete their Self-Assessment tax returns.
You must also keep records of any director’s loans (when you take money out of the company that’s not a salary payment or dividend) which will need to be declared in your annual accounts.
What help is available to a limited company director?
There’s a lot to keep track of as a company director, and the stakes are high as the buck for any errors or failure stops with you. To help prevent missed deadlines you can subscribe for email reminders from Companies House which will notify you when accounts and confirmation statements are due. There is also a director’s toolkit available on the GOV.UK website, as well as webinars you can access on topics such as ‘Director’s Responsibilities’.
You should also work with an experienced limited company accountant. They will be by your side as your company grows, taking the pressure off you by preparing statements, accounts and tax returns for you ready for filing to the relevant authority in a timely manner. If you would like to learn more about our limited company accountant services, please don’t hesitate to get in touch!
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