[18.04.25]

A company Director is responsible for the running of a limited company – they have legal and financial responsibilities, which must be adhered to.  In this article we set out those responsibilities.

1. Register with Companies House

The first step is to choose a company name.  Your name cannot be the same as another registered company’s name. If the name is too similar to another company’s name or trade mark you may have to change it if someone makes a complaint.

Limited companies must have at least one director, and can have multiple shareholders.

Under the Companies Act 2006 a limited company must have a Memorandum of Association and Articles of Association.  A Memorandum of Association is a legal statement signed by all initial shareholders or guarantors agreeing to form a company.   Articles of Association cover a number of elements including company purpose, its administrative structure, powers and duties of company Directors and the awarding of dividends.  The Companies Act 2006 also sets out Model Articles of Association as standard default articles a company can use.  However, some companies engage solicitors to draw up bespoke Articles which still fulfil the requirements set out in the Companies Act 2006.

All of these elements must be registered with Companies House.  Castletons Accountants can set up the company and register your company with Companies House, ensuring that you are compliant with the Companies Act 2006.

2. Keeping Records

Company Directors are responsible for keeping accurate financial records, both for tax purposes but also to ensure that the company is financially healthy.

You must use a business bank account for your limited company. The financial records you must keep  include:

• all money received and spent by the company
• details of assets owned by the company
• debts the company owes or is owed
• stock the company owns at the end of the financial year
• the stock takings you used to work out the stock figure
• all goods bought and sold, and who you bought and sold them to and from, unless you are a retail/leisure business

You must keep invoices, contracts, sales books, till rolls, bank statements and correspondence. You must keep records for six years from the end of the last financial year they relate to, or longer if the item will last longer than six years such as plant/machinery.

If you do not keep adequate and accurate records, HMRC could fine you £3,000 or disqualify you as a company Director.

3. File Accounts and Company Tax Returns

Company Directors are responsible for ensuring accurate Accounts and Company Tax Returns are submitted by the deadlines.  Using your accurate and up to date records set out above, Castletons Accountants can draft your Accounts and Tax Returns.

The deadlines for submitting these documents are:

• File first set of Accounts 21 months after registering the company with Companies House
• Thereafter the Accounts are due nine months after the end of the company’s financial year
• Pay the Corporation Tax due nine months and one day after the accounting period for Corporation Tax ends
• The Company Tax Return must be filed within 12 months after the accounting period for Corporation Tax ends

4. Pay Taxes on Time

All limited companies are subject to Corporation Tax, and this must be paid nine months and one day after the accounting period for Corporation Tax ends.

Directors are also responsible for registering for VAT.  You must register if the total taxable turnover for the last 12 months goes over the VAT threshold; or you expect your taxable turnover to go over the VAT threshold in the next 30 days.  The current VAT threshold in the tax year 2025-2026 is £90,000.  Directors are responsible for submitting quarterly VAT returns and paying HMRC the VAT due.  The return and payment must both be submitted one month and seven days after the end of the company’s VAT period.  Castletons Accountants can manage the VAT process for you, completing and submitting your quarterly VAT returns.

Where the company employs staff, including Directors, the company must register as an employer with HMRC.  The Director will be responsible for submitting PAYE information to HMRC, ensuring that the income tax and National Insurance Contributions for each employee is correct.  Castletons Accountants can run and manage your payroll system, ensuring that you are paying employees and HMRC the correct amounts.

Should any of these taxes not be paid on time, penalties and interest will be added to the amount owed.

5. Maintain Statutory Records

Directors must maintain and submit to Companies House any changes to statutory information, including:

• The company’s registered address and email address
• The company’s contact details, for example, the Directors’ names, gender or personal addresses, business name or the trading address
• You appoint or change an accountant or tax adviser
• If you issue more shares in your company

6. Complying with Legal Requirements

Directors are also responsible for ensuring that the company is adhering to all other legal obligations, including:

• Employment law
• Intellectual property – protecting the company’s own and ensuring the company is not contravening others’ intellectual property
• GDPR and data protection
• Obtaining appropriate insurance – such as public, employment, professional indemnity

7. Taking Money Out of the Company:

There are a number of ways a Director can take money out of the company:

• Director’s Salary – Directors are legally employees of the company, so they can be paid a salary. The salary is subject to PAYE income tax and National Insurance Contributions.
• Dividends, ie. a share of the company’s profits, are paid out to shareholders. The company must not pay out more in dividends than the company’s available profits from the current or previous years. Dividends are taxed as income and are subject to a different tax rate than salary. They are often a tax-efficient way to take money out of the company, especially for those who have already paid corporation tax on the profits.
• Director’s Loan – if a Director takes out more than they have put into the company and it’s not salary or a dividend, it is a Director’s Loan. Whilst this is allowed, it must be properly documented and repaid. If a loan isn’t repaid within a certain timeframe, typically nine months after the company’s year-end, it may be treated as a taxable benefit in kind.
• Claiming Allowable Expenses – Directors can claim expenses that are incurred for legitimate business purposes and are deductible for corporation tax.

Castletons Accountants can advise you of the best and most tax efficient way to take money out of the company.

Castletons Accountants