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BETTER BUSINESS

benefit the director personally: trader, it can be relatively straightfor-
“Failure to do this can result in seri- ward to end the business as “all
ous legal consequences for the direc- income was taxed as it was earned,
tor who might be held liable leaving the individual to just ‘walk
personally for any failures to uphold away’ from it knowing what they
their duties.” have earned is theirs”.
Kieron Batham-Tomkins, senior But the situation is very much dif-
tax manager at accountancy firm, ferent for a limited company. Here
BHP
he says that “thought needs to be
Payroll and paperwork given on how the company may be
Few gravitate to payroll and paper- wound up”. He asks: “Can the com-
work which is why Kieron Batham- pany be sold? Is it going to be passed
Tomkins sees many clients who don’t down to the next generation? Has the
understand that on top of Companies company come to an end and if so,
House and HMRC filing require- how are funds going to be extracted –
ments in relation to the running of a by dividend or through a liquida-
limited company, “many don’t com- tion?”
prehend the detail and obligations of From his perspective, too few com-
running a payroll and the need to pany owners think about the end
complete paperwork such as divi- game in good time and so either lose
dend vouchers”.
value, pay too much tax on the exit or
Trivial benefits add up both. As he says, “all of the possible
Another mistake that Batham- scenarios need good planning well in
Tomkins sees directors – and their advance to understand the tax impli-
companies – often make is the failure cations and what the best option is
to make full use of the trivial benefits for the company and the individuals
exemption. Over the course of a year involved.”
he says that “these can add up and The right advisors
serve as a nice little ‘extra’”.
Effectively, under the trivial bene- Batham-Tomkins moves to his
fits rules, a director can receive six final point: making sure that com-
which will have a personal tax consequence – to give them the funds to lots of £50 gifts from their company pany owners have the right advisors
repay the loan. each year, with no tax implications. in place to offer the most up to date
And if a director is overdrawn by more than £10,000 at any time during But there are rules to observe and and bespoke advice for them and
the year, they must also pay interest to the company at a minimum rate set Batham-Tomkins details that “the their business. He recognises that he
by HMRC or be assessed to be in receipt of a benefit in kind. gift cannot be cash or a cash vouch- is naturally biased, but nevertheless
Informing customers and suppliers ers, and it also can’t be a reward for he says that “having the right advisors
service or performance, but as long as
Another area where Thornley sees directors make mistakes is in the fail- at the right time can help save tax
ure to inform customers and suppliers of the business that it has incorpo- there are six reasons throughout the upfront, down the line, and help
year such as a birthday, Easter,
rated and that they are now dealing with a different legal entity. As a result Christmas, an anniversary or the like, avoid any pitfalls that come with run-
she advises that “all websites, email signatures, letterheads, stationery, then the company can provide a ning a company”. As he says, “in the
invoices, order book, etc all need to be updated to show the company’s director with up to six gifts through- fast-paced world in which we live,
name, where it was registered (England & Wales, Northern Ireland, out the year – completely tax free.” what can be sound advice today,
Scotland or Wales), the registered number, and the address of the registered might not hold true in six- or
office”. What happens at the end? 12-months’ time”.
Very simply, a company that does not disclose all the details required risks It’s all well and good running a
fines for both the company and the directors. business, and doing so successfully, In summary
Statutory duties but part of the story is considering It’s very easy for a business owner
what will happen at the end. In other to misunderstand the law in relation
The last of Thornley’s five key trouble spots revolves around company to companies. It’s also true that own-
directors not fulfilling their legally set responsibilities to the company. She words, how will the owner – direc- ers can miss out on perfectly legal
says that these include acting to promote the success of the business, exer- tors - bring the business to a conclu- tax-saving steps that they can take.
cising reasonable skill and care, as well as avoiding or managing conflicts of sion – an exit?
interest between what is for the benefit of the company and what would Batham-Tomkins says that as a sole Good advice is, simply, essential.

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