As a limited company director, you are legally responsible for the daily running of your limited company, including the preparation and submission of financial records for Her Majesty’s Revenue and Customs (HMRC).
Once the business is registered and active on Companies House, your duties as a limited company director will fall into place and you will be scrutinised for the financial performance of your business.
As the director of a limited company, your details will be shown on the Companies House register, making your association with the business public knowledge. If you fail to fulfil your duties as a company director, this could result in director disqualification which could significantly damage your prospects in the field as a company director.
You are obliged to retain records of the company, including accountancy related data. If you fail to do so, you could be fined up to £3,000. Accounting records as such should be kept for six years, or longer in some cases. If records are kept other than at your registered office address, you should inform Companies House with the address details.
Records the company director should keep hold of include the following:
- Directors, shareholders and company secretaries.
- Results of shareholder votes and resolutions.
- Agreements the company makes for debentures and indemnities.
- Transactions relating to the purchase of shares in the company.
- Loans or mortgages secured against the company’s assets.
- People with significant control. A person with significant control (PSC) includes anyone with more than 25% shares/voting rights in your company, who can appoint or remove a majority of directors and can influence or control your company.
Your accounting records must include the following:
- Income and expenditure of the company.
- Details of assets owned, debts and stocks owned at the end of the financial year.
- Stocktakings used to calculate the stock figure.
- Goods bought and sold, including details of receipts (retail businesses excluded).
Funds leaving the business also include salary payments for employees. To do so, you should be registered as an employer and deduct Income Tax and National Insurance Contributions before paying a salary. This also includes dividends, expenses, benefits and a Directors’ Loan Account. A Directors’ Loan Account is when the company director withdraws cash from the business in a form which differs from dividends, expenses, salary or expenses, taking out more than what was originally put into the company.
Financial records needed to prepare and file your annual accounts and Company Tax Return should also be retained, this includes:
- Records relating to company expenditure, such as dividend vouchers, receipts, petty cash books, order and delivery notes.
- Records relating to company income, such as invoices, contracts, sales books and till rolls.
- Other relevant documents, such as bank statements and transaction breakdowns.
Change in company records
You are obliged to report any changes to your company records, including the following:
- Director details, including those with significant control and company secretary.
- Contact details.
- Appointment of accountant.
A limited company director can be disqualified if they are declared as unfit. If this is the case, you will be disqualified for up to 15 years in which you’re unable to become a company director or be involved in any sort of activity with forming, marketing or operating a limited company. If you break these terms, you could be imprisoned for up to 2 years or fined. A company director can be disqualified due to the following actions:
- Continued trade after discovering that the business is unable to pay its debts.
- Failure to pay tax to HMRC.
- Failure to prepare proper accounting records and send accounts and returns to Companies House.
- Utilising company money or assets for personal benefit.
Working as a limited company director means being responsible for the administrative tasks associated with business management. As a director, it’s vital to keep on top of any accounting deadlines, including your duties to contributing National Insurance, Corporation Tax and registering for the Flat Rate VAT Scheme, if applicable. You essentially must ensure that the business is operating in a tax-efficient manner and complying with guidelines set out by HMRC.
You may decide to appoint an accountant or invite a seasoned expert onto the scene to collate the data and prepare any financial documents required of your business. Aside from fulfilling your legal duties, working as a company director can leave you with a feeling of satisfaction by expanding your knowledge and giving you the autonomy to determine the best approach forward for your business.
David Tattersall is head of client relations at Handpicked Accountants, a national network which connects small businesses and self-employed professionals with reputable, local accountants across the country. David has a wealth of experience in company rescue, recovery and has over 35 years’ experience working in financial services.