Registering a New Limited Company in Scotland

The first thing to remember is that Scotland is different than England and Wales. Very different! If you register a company in Scotland, you will always need to have a Scotland registered office and vice versa. So, make sure you are happy with the company being registered in Scotland.

The big difference is the application of laws. There are also 3 different Companies House locations. Edinburgh for Scotland, Belfast monitors Northern Ireland, and Cardiff manages England and Wales. Even though most of the work is done in Cardiff, theoretically each register is seen as separate and can be distinguished with a prefix - ‘SC’ for Scotland.

Because the three countries are managed in one combined register, a name registered in Northern Ireland will not be available for registration in Scotland, England or Wales and vice versa. As previously mentioned, you can move your company to another suitable address within the original country in which it was formed.

Unfortunately, there is no mechanism to move a company from one UK country to another. If you need to physically move the business from one country to another, you may need the services of a virtual office to maintain an effective address in the country of registration.

Directors Responsibilities

When you are appointed a director of a company you become an officer with extensive legal responsibilities. For a director of an incorporated body, the Companies Act 2006 sets out a statement of your general duties.

The Companies Act 2006 highlights the connection between what constitutes the good of your company and a consideration of its wider corporate social responsibilities.

• Duty to act within their powers

As a company director, you must act only in accordance with the company’s constitution and must only exercise your powers for the purposes for which they were conferred.

• Duty to promote the success of the company

You must act in such a way that you feel would be most likely to promote the success of the company (i.e. its long-term increase in value), for the benefit of its members. This is often called the ‘enlightened shareholder value’ duty. However, you must also consider several other factors, including:

• the likely long-term consequences of any decision

• the interests of company employees

• fostering the company's business relationships with suppliers, customers and others

• the impact of operations on the community and environment

• maintaining a reputation for high standards of business conduct

• the need to act fairly as between members of the company

• duty to exercise independent judgment

You have an obligation to exercise independent judgment. 

• Duty to exercise reasonable care, skill and diligence

This duty codifies the common law rule of duty of care and skill and imposes both ‘subjective’ and ‘objective’ standards. You must exercise reasonable care, skill and diligence using your own general knowledge, skill and experience (subjective), together with the care, skill and diligence which may reasonably be expected of a person who is carrying out the functions of a director (objective). So, a director with significant experience must exercise the appropriate level of diligence in executing their duties in line with their higher level of expertise.

• Duty to avoid conflicts of interest

This dictates that, as a director, you must avoid a situation in which you have, or may have, a direct or indirect interest which conflicts, or could conflict, with the interests of the company.

• Duty not to accept benefits from third parties

Building on the established principle that you must not make a secret profit as a result of being a director, this duty states that you must not accept any benefit from a third party (whether monetary or otherwise) which has been conferred because of the fact that you are a director, or as a consequence of taking, or not taking, a particular action as a director.

This duty applies unless the acceptance of the benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.

• Duty to declare interest in a proposed transaction or arrangement

Any company director who has either a direct or an indirect interest in a proposed transaction or arrangement with the company must declare the ‘nature and extent’ of that interest to the other directors, before the company enters into the transaction or arrangement. A further declaration is required if this information later proves to be or becomes either incomplete or inaccurate.

The requirement to make a disclosure also applies where directors 'ought reasonably to be aware' of any such conflicting interest.

However, the requirement does not apply where the interest cannot reasonably be regarded as likely to give rise to a conflict of interest, or where other directors are already aware (or 'ought reasonably to be aware') of the interest.

In terms of the government’s website it is important for directors to

1. Keep company records

2. Report Changes to the companies information

3. File company Accounts – 9 months after year end

4. File Company tax return – 12 months after accounting period end

5. Pay Corporation tax - Pay within 9 months or tell HMRC that there is no obligation to file

Practical things to remember:

• When you register you company in Scotland, you will get the following documents

  • Articles of Association

  • Certificate of incorporation

  • Registered for Corporation tax – Done automatically and a letter will be sent by HMRC to the registered address at Companies house

  • You will receive an authentication code that is important for all future filings with company’s house

Keep the above documents safe and readily available.

• When you register a company in the UK, you can appoint a registered office. This will allow all documents to be sent to the address. This address needs to be updated if there are any changes because a lot of correspondence will be sent via post. i.e. reminders to file, notices etc.

• The VAT threshold is £85 000 turnover per year. If you go over this threshold and do not register for VAT, you will be fined, and you will be liable for VAT on the turnover

• Dividends are taxed in the shareholders hands and not in the company. A dividend voucher is issued to shareholders and the dividend income should be declared in the personal self-assessment/tax return

• There is no withholding of tax payable if the shareholders are not domiciled in the UK

• If directors plan to take a salary, they must register for PAYE

• Directors of a company need to file a tax return even if they did not receive any income. Especially when they have received a letter from the HMRC saying they are liable to file

• All company’s information is available on the Companies House website. This includes annual accounts, director’s information and persons with significant interest.

• When registering a company you need to appoint at least one director

• You do not need to register a company secretary