Limited Company Formation - Accountancy Checklist

Deciding to set up a limited company is exciting, but it can also be nerve-wracking. You will have a range of responsibilities such as registering with companies house and setting up a company bank account. While none of these things are difficult on their own, it can seem like a mountain to climb when you’re new to this way of working. With the help of a specialist contractor accountant, you can ensure that everything is done compliantly and your systems and process are set up in a way that is easy to manage going forward – giving you a head start from the word go.

Workwell has been helping new and existing contractors to manage their finances compliantly for over 30 years, giving new contractors the confidence to bring their vision to life by providing support with everything from HMRC registration and invoice management to financial planning. For many, knowing that you have a clear understanding of what money you’ll need, how working this way will impact your pension, the savings you have in place, and a backup plan for your financial arrangements will give you that added boost to feel ready to go without financial anxiety – and a specialist contractor accountancy practice, like JSA, can help you put all of these arrangements in place before you start.

To help get you on your journey, here JSA’s expert contractor accountants outline the basic accountancy tasks you should have set up from the outset, all of which they’ll be happy to support you with whenever you decide to make the leap and form your own limited company.

Your formation checklist

• Determine your SIC code and form your company

A SIC code (Standard Industry Code) will be required when registering your company. This broadly describes the trading activities of your company.

• Register your company with HMRC

Once the company is formed, registering with HMRC is a relatively straightforward process. You will need to submit a CT61G document that officially notifies HMRC of your new company’s details.

• Register for Self-Assessment Tax

Registering for Self-Assessment Tax will ensure you comply with the rules that require almost all company directors to be registered to file an annual personal tax return.

• Arrange payroll, and National Insurance

As a company director, you are classed as an employee as well as an employer. This means you must pay Employees’ and Employers’ National Insurance. We can help you work out what NI you need to pay and when.

• Register for VAT

You will need to become VAT registered if your turnover goes over a certain level (unless you work in a sector that doesn’t operate VAT). You may also be able to use the flat rate VAT scheme which allows you to pay a fixed rate of VAT to HMRC and keep the difference between what you charge customers and what you pay to HMRC.

• Open your business bank account

It’s vital to keep your business and personal finances separate. The best way to do this is through a business bank account, designed to process all your earnings and expenditure.

• Set up bookkeeping arrangements to manage expenses & invoices

You’ll need to keep on top of your finances, keeping a regular record of any company-related expenses as well as copies of invoices you have sent to clients. Regularly updating your records and ensuring you have a clear filing system will help you determine your company profits and help you complete your Self-Assessment Tax Return accurately.

• Create a balance sheet & review it regularly

A balance sheet lists your assets, liabilities, and equity for a specific date, illustrating your business’ net worth and the financial health of your company. You can also use your balance sheet to determine how to meet your financial obligations and use credit to finance your processes. It’s sensible to review your balance sheet at the end of each accounting period – perhaps monthly or quarterly, enabling you to track your business’s progress as it grows, and identifying areas for improvement. With JSA, accounting software that allows you to produce a balance sheet at any point is included in our service as standard.

• Create a P&L Statement for regular review

A P&L (Profit and Loss Account) or income statement shows how much profit and loss was generated by your company over a given period. It summarises the revenues, costs, and expenses incurred and should be issued monthly, quarterly, and annually. It is important to compare P&L Statements from consecutive accounting periods to identify changes in revenue, operating costs, research and development expenses, and net earnings over time. A P&L that you can access online 24hrs a day is included in your package with JSA.

• Create a cash flow statement and forecast

A cash flow statement is a financial statement which summarises the quantities of cash (or cash equivalents) entering and leaving your company. The cash flow statement measures how well your company generates cash flow to pay debt obligations and fund ongoing expenses.

Once your business is up and running, you should discuss the options for preparing a cash flow forecast with your accountant. A cash flow forecast is the same information as a cash flow statement but based on future expected activities. The forecast, therefore, is very useful so that you can make sure your business has the funds it needs to stay afloat. Cash can often be required before all of your customers have paid you, so being familiar with your cash flow patterns is a great help in running a successful business.

Regular requirements

Once you’re all set up with the items above, it’s best to keep on top of your finances by dedicating around 20 minutes per week to record-keeping. Here’s a list of some of the jobs you need to do, and how often you’ll normally need to attend to them.

Weekly tasks will include things like invoicing your clients/recruitment agency, you’ll also need to check your bank statements and keep accurate records of allowable business expenses (filing receipts for safe-keeping).

Once a quarter, you’ll need to submit a VAT return (if you’re VAT registered) and pay your Employers’ and Employees’ National Insurance and PAYE (if your pay level requires it). You should also create an updated P&L Statement and spend time analysing this against the previous quarter’s.

Annually, you will also need to submit an Annual Report to Companies House as well as year-end accountants to HMRC. You’ll also need to create a P&L Statement for the year and analyse this against that of the previous fiscal year.

Support & advice

When considering contracting through your own limited company, it’s important to seek specialist accountancy advice to check that this is an appropriate route for you and gain support through your formation and ongoing financial management. At Workwell, our knowledge of limited company taxation and compliance is second-to-none. We have been providing clear, expert, and compliant services to limited companies for over 30 years, changing and developing with the legislation.

If you’re new to contracting, we’ll help you set up your limited company, walking you through all the items on the checklist above and arranging your financial affairs in a tax-efficient and compliant manner with the help of our online MTD software and experienced team.

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