Navigating various UK agencies and authorities on business matters as you’re starting a company can be frustrating, as their processes and oversight can be confusing.
Learn what Companies House is in this article as one of the larger organisations you’ll need to work with across your new business’ future. Find out:
- What is Companies House, and what does it do?
- What does ‘incorporate’ mean?
- What does ‘dissolve’ mean?
- Why is Companies House important?
- Is Companies House related to HMRC?
- How to run your company more efficiently with Countingup
What is Companies House, and what does it do?
For nearly 200 years, Companies House has been the UK’s registrar for companies. This means that it acts as the authority over new businesses seeking to become companies and maintain public records of existing ones.
As a company registers, Companies House requires them to meet certain requirements during the process like what name can be used, how owners declare and disclose their involvement, and how the company can be classified for investment or tax purposes. Once registered, Companies House requires that companies report whether anything has changed in the past year (including new investors or board members appointments), including declarations even when nothing has changed.
Companies House only deals with limited companies (or those seeking to set one up) and not with sole traders. Therefore, if you’re looking to start a business, you don’t have to go through Companies House just to make money. If you’re unsure about the different ways of doing business within the UK, read our guide on How to set up your business.
What does ‘incorporate’ mean?
When Companies House grants permission for a business to form a company, this process is called incorporation. This refers to each of the steps outlined above:
- The shareholder (or shareholders) declare their agreement to form a company through a ‘memorandum of association’ and disclose the share structure of the company detailing who owns significant portions.
- The shareholder (or shareholders) appoint a director to run the company, often the same person as the first shareholder, and sometimes a secretary or additional directors also.
- The shareholder (or shareholders) declare how they’ll run the company by writing an ‘articles of association’ document.
From here, Companies House takes these various pieces of information and documents and creates a publicly available online listing for the company and each shareholder involved in the business.
What does ‘dissolve’ mean?
Across a company’s life, if it fails to provide updates to Companies House or goes out of business, the company can be dissolved. There are various ways of dissolving a company depending on whether the company can pay its bills and whether the dissolution is necessary on this basis.
Once a company is dissolved, the register listing for the company is still publicly accessible as a record for previous ownership. However, the company no longer exists and cannot continue to do business.
Why is Companies House important?
Companies House plays a critical role within the UK business setting by providing two key benefits: transparency and behavioural best practice.
Because each company’s registration information and trading performance is made publicly available, Companies House plays a critical role in bringing transparency to large businesses. From a business point of view, this helps investors and competitors keep track of how an industry is performing. Whether you’re looking to buy equity in a company or find out how your competitors are performing, you can use Company House’s online portal to conduct research for free.
In particular, at the start of 2021, there were plans announced to introduce investigative powers in order to increase the quality of the registered information. Soon, Companies House may be able to query the accuracy of company filings and ask for supporting evidence where relevant. It’s hoped that these steps will help prevent fraud and increase trust within the UK business environment. Therefore, as long as your filings are accurate and true, you should have nothing to worry about.
Behavioural best practice
Companies House also holds a register of directors who have been disqualified, which is available to view using the same online portal. Disqualifications occur when a company’s director fails to fulfil their responsibilities in running the company legally and can last for up to 15 years.
Disqualifications have far-reaching and serious consequences, therefore, this additional register of disqualified members helps to promote a best practice approach as it places long-term effects on poorly operating directors beyond any criminal charges that face also.
Is Companies House related to HMRC?
Companies House is a separate organisation to HMRC but both fall under the control of the UK Government’s civil service. This means that they are related to each other through their relationship as official government organisations.
The roles that these government organisations perform are very different. Companies House has no tax powers. It manages the register of information about companies within the UK. In contrast, HMRC has responsibility for tax collection within the UK.
Companies House works with HMRC to provide new companies with a 10-digit unique taxpayer reference code and will register your company as an employer (for your position as director) with HMRC. Similarly, HMRC may also use your business’ official and publicly available documents on Companies House on your accounts if they choose to audit you and compare your finances for inconsistencies. Therefore, Companies House shares information with HMRC where relevant.
Keep organised when it comes to business admin from day one
If you’re ready to set up a limited company, it’s time to start thinking about setting up a new business current account to keep your personal and business expenses separate.
The Countingup app makes it easy to keep on top of your business finances from the start. The two in one app comes with free built-in accounting software that automates the time-consuming aspects of bookkeeping. You’ll also be able to create customised invoices in seconds, saving you time to focus on running your business.
Gain complete confidence in your business’ finances. Find out more here and sign up for free today.