The pros and cons of forming a limited company

Lawpack on March 27, 2020

Limited companies are among the two most popular types of company chosen by UK business people, with the sole trader route the other main avenue.

The first step for anyone setting up a limited company is to register it with Companies House, which oversees the registry of companies.

Company registration matters are enshrined in the Companies Act 2006, with Companies House an executive agency of the Department for Business, Innovation and Skills.

Currently, there are more than two million limited companies registered in Great Britain, with over 300,000 new firms incorporated every year.

Under the Companies Act 2006, each limited company must have at least one director. However, having a company secretary is no longer mandatory.

Business owners are often unsure about which entity to trade as – sole trade, partnership or limited company.

There is no legal obligation for companies to trade using a particular entity, but there are differences between them. Here we outline the pros and cons of limited company incorporation.

What are the advantages of forming a limited company?

Status

The term ‘limited’ gives the company a bit more weight so it appears to hold more esteem and seems bigger, both for potential investors and consumers.

Investors

Investors are more inclined to take a chance on limited companies as their investment has more protection than a sole trader or partnership.

Under a limited company, the investor’s liabilities are also limited to their shareholding, thus giving them more security than other companies offer.

Security

As such, banks also tend to favour limited companies and they are given the chance to take out extra security by lodging a ‘floating charge’ over the company’s assets.

That means that if the terms and conditions of the loan are breached, the bank has the first claim on the assets.

Shares

Provided there are no unusual clauses in the shareholder’s agreement or company’s articles, transferring shares in a limited company is generally easier and more straight-forward than it would be in a partnership or sole trader.

Dividends

The dividends of a limited company are not subject to national insurance and are at a lower rate of tax than self-employment income.

Effective tax rates

If you intend retaining some of the profits within the business, then it might be best to go limited as this reduces the tax rate.

Despite these positives, there a number of cons to keep in mind.

What are the disadvantages of forming a limited company?

Liability

Banks will still require personal guarantees from the directors, which means that the directors can still be liable for the company’s debt.

Administration

Directors are also expected to deliver statutory documents to Companies House, so anyone failing to do this is subject to late filing penalties and could be deemed to have carried out a criminal offence.

Less privacy

Becoming a limited company means accounts and other details are held on public records so anyone, including competitors, can access company information, although it can be restricted.

Withdrawals

Making withdrawals from the company can also pose a problem in terms of tax as it is difficult for shareholders and directors to separate their finances from those of the business.

Accountancy fees

One expense bound to be higher for limited companies is the accountancy fee as reporting requirements tend to be bigger.

With all this in mind, it is worth remembering that limited company incorporation can be a profitable prospect, so why not read Lawpack’s practical guide on How to Run a Limited Company?

Written by HM Williams Chartered Accountants, this detailed guide is packed full of information and expert advice on the legal duties and formalities that must be followed when incorporating a company.ADNFCR-1645-ID-801387379-ADNFCR

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Which tenancy agreement do I need?

Lawpack on March 27, 2020

You’ve got your rental property and found your tenant – all you need to do is get them to sign a tenancy agreement. But which one do you need.

If you’re a landlord who thinks tenancy agreements are unnecessary, think again! A tenancy agreement is vital as it sets out the rights and obligations between you and your tenant and, as a result, protects your property and your finances. But you must use the correct tenancy agreement for the right type of tenancy concerned.

Lawpack has a wide range of tenancy agreements, including assured shorthold tenancy agreements, non-assured shorthold tenancy agreements, private residential tenancy agreements, company let tenancy agreements and lodger agreements. But which tenancy agreement should you use?

England and Wales

AST or non-AST?

Most tenancies in England & Wales are assured shorthold tenancies (ASTs) and are regulated by the Housing Act 1988.

Some tenancies are exceptions, however, and you may need to use a non-assured shorthold tenancy agreement if any of the following applies:

  • The rent is at the rate of over £100,000 a year
  • The tenant is living in self-contained premises in the same building as you
  • The tenant is a limited company
  • The property isn’t the tenant’s main home (e.g. a weekend cottage)
  • It’s a holiday let

Find out more about non-AST tenancy agreements and which one you need to use below.

Assured Shorthold Tenancy (AST)

Assuming your tenancy is an AST, slightly different forms of tenancy agreement need to be used depending on whether:

  • there is one or more tenants living in the whole flat or house, or
  • there are a number of tenants who all have separate tenancy agreements for their own room, with shared use of the rest of the property

Lawpack publishes the following AST tenancy agreements you can use:

Unfurnished Tenancy Agreement / Furnished Tenancy Agreement

You can use either of these AST tenancy agreements if you, as the landlord, don’t live at the property. Both tenancy agreements can be used for a single tenant who occupies the property on their own, or a group of tenants who jointly occupy the property and share responsibility.

If the tenants are sharing and sign this tenancy agreement as a group, it’s best if they are all family or friends as problems can arise if you’re letting to people who don’t know each other and they want to leave the property at different times.

Tenancy Agreement for a Room

It may be preferable for you to get them to sign a tenancy agreement for their individual room, which gives them shared use of the rest of the property. When giving your sharing tenants a separate tenancy agreement, it’s best to use a non-resident house share/flat share agreement.

This tenancy agreement can be used if the tenant is living in a room in the property where you, as the landlord, are not resident.

Under this AST tenancy agreement, the tenant has exclusive occupation of their designated room and will share the use and facilities of the house or flat (e.g. bathroom, toilet, kitchen and sitting room) with other occupiers of the furnished property.

Non-Assured Shorthold Tenancy

In England & Wales non-assured tenancy agreements are also known as ‘common law’ tenancy agreements as they are governed by underlying common law and are not regulated by the Housing Act 1988.

Lawpack has the following non-AST tenancy agreements you can use:

Contractual Tenancy Agreement (Non-Assured Shorthold Tenancy Agreement)

This non-AST tenancy agreement (for England & Wales) should be used if:

  • The annual rent exceeds £100,000 a year
  • The premises being let is self-contained accommodation in a property that has been converted from a single property to multiple units (e.g. a house converted into flats), where you (the landlord) live
  • The property isn’t the tenant’s principal home (e.g. a weekend cottage)

This common law tenancy agreement can be used for a single tenant who occupies the property on their own, or a group of tenants who jointly occupy the property and share responsibility.

Company Let Tenancy Agreement

This Company Let Tenancy Agreement should be used if you want to let a house or flat in England or Wales to a company.

This common law tenancy agreement should be used where the tenant is a company and the occupier of the property is an employee or visitor of the company, with their family.

What if I use an AST by mistake?

If you accidentally use an AST instead of a common law tenancy agreement, don’t panic. It doesn’t mean that your tenant isn’t entitled to live in the property and doesn’t have a proper tenancy. But some parts of the tenancy agreement – those relating to the AST – will be misleading and could cause problems later down the line (e.g. you may have difficulty evicting the tenant at a later date).

Other letting agreements

Holiday Letting Agreement

This rental agreement can be used if you’re letting out a furnished property in England & Wales on a holiday let basis (e.g. for a limited period or holiday). It can be used with most types of holiday let properties (e.g. a house, apartment, flat, caravan or cottage).

The Holiday Letting Agreement is specifically excluded from the Housing Act 1988, so tenants have no security of tenure and must vacate the property at the end of the fixed term, or if found to be in breach of the terms of the Holiday Let Agreement.

Lodger Agreement

You can use this Lodger Agreement when you want to rent a room in your furnished home and are happy for the lodger to share the common parts of the property (e.g. bathroom, toilet, kitchen and sitting room) with you. But this Lodger Agreement can only be used in situations where the property is your principal home.

Scotland

Private Residential Tenancy agreement (PRT)

PRTs are similar to ASTs in England & Wales. You can use a short assured tenancy agreement if you, as the landlord, don’t live at the property.

Lawpack has the following Scottish PRT tenancy agreements you can use:

Unfurnished Tenancy Agreement / Furnished Tenancy Agreement

Both of these PRT tenancy agreements can be used for a single tenant who occupies the property on their own, or a group of tenants who jointly occupy the property and share responsibility.

Tenancy Agreement for a Room

This tenancy agreement can be used if the tenant is living in a room in a furnished property where you, as landlord, are not resident.

Under this PRT tenancy agreement, the tenant has exclusive occupation of their designated room and will share the use and facilities of the house or flat (e.g. bathroom, toilet, kitchen and sitting room) with other occupiers of the property.

Other letting agreements

Holiday Letting Agreement

This agreement can be used if you’re letting out a furnished property in Scotland on a holiday let basis (e.g. for a limited period or holiday).

It can be used with most types of holiday let properties (e.g. a house, apartment, flat, caravan or cottage).

The Holiday Letting Agreement is specifically excluded from the Housing Act 1988, so tenants have no security of tenure and must vacate the property at the end of the fixed term, or if found to be in breach of the terms of the Holiday Let Agreement.

Lodger Agreement

You can use this Lodger Agreement when you want to rent a room in your furnished home and are happy for the lodger to share the common parts of the property (e.g. bathroom, toilet, kitchen and sitting room) with you. But this Lodger Agreement can only be used in situations where the property is your principal home.

Northern Ireland

Private Tenancy

Lawpack has a Northern Ireland Tenancy Agreement which complies with the regulations that apply to private residential tenancies in Northern Ireland.

This private tenancy agreement can be used for a single tenant who occupies the property on their own, or for a group of tenants who jointly occupy the property and share responsibility.

The terms and conditions included in this tenancy agreement meet the legal requirement in Northern Ireland that a ‘Statement of Tenancy Terms’ must be given to the tenant. Plus it includes a Property Inventory of Furnishings, which all tenancies are required to have by law in Northern Ireland.

How to use a General Power of Attorney

Lawpack on March 27, 2020

A General Power of Attorney (GPA) is a document which authorises someone to act on your behalf and in your name.

It’s a relatively straightforward authorisation and can be used for a wide range of circumstances or for specific periods and events.

It doesn’t have the added complications of a Lasting Power of Attorney (LPA); as such it is a simple form to fill out.

A GPA can only be used with regard to your property and financial affairs. It cannot be used to authorise someone to make decisions concerning your personal welfare (unlike a Lasting Power).

When will I need a GPA?

You may need to create a General Power for specific events; for example, if you go abroad and wish to entrust the management of your business interests to a family member.

You can use it for a specific period or event, when your age and health make it unlikely that you could lose capacity during the duration of the Power.

When does it end?

A General Power of Attorney automatically ceases to have effect if you should become incapable of making the decisions conferred by the Power.

This is in contrast to a Lasting Power, which remains in force provided that it has been registered.

Who can make a GPA?

You must be over 18, have capacity to grant it and not be an undischarged or interim bankrupt.

What happens once it’s been granted?

In legal terms, the person giving the power is called the “Donor” in England & Wales or the “Granter” in Scotland. The person who is receiving the power is called an “Attorney”.

Once you have granted a General Power, you have given authority for the Attorney to take decisions and act on your behalf regarding your property and affairs, as if you were taking them yourself.

The exception is that the Attorney cannot make gifts.

What powers does the Attorney have?

A General Power of Attorney is very wide-ranging and as a result, an Attorney can do anything they think fit in relation to your property and affairs.

But the Power doesn’t cover functions which relate to certain special personal responsibilities. For example, an Attorney cannot normally perform in your role as a trustee or as a personal representative (i.e. administrator) of someone’s estate.

An Attorney cannot sign a Will on your behalf, take action concerning your marriage or delegate their Power to someone else.

Am I liable for the Attorney’s actions?

Yes, so you must only give the power to somebody you trust implicitly.

How long does a GPA last for?

If you become incapable of making the decisions conferred by the Power, the General Power is automatically annulled. Otherwise, a General Power remains valid until it’s revoked.

Can it be revoked?

Powers can be revoked orally, but to avoid misunderstanding it’s wise to write ‘cancelled’ on the original General Power of Attorney form or simply tear it up.

The General Power would also be revoked if you or the Attorney died or become bankrupt.

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What you can and can’t say in a job advert

Lawpack on March 27, 2020

You can’t just say whatever you like in a job advert because you could find yourself breaking discrimination laws. Job adverts will be illegal if they discourage a certain group of people from applying. For example:

‘Salesman wanted…’

This is gender bias because the word ‘man’ excludes women. In this case it would be much better to say ‘salesperson’ or make it very clear in the advert that both men and women can apply.

Another example of discrimination in an advert is:

‘Single professional sought…’

This is illegal because it discriminates against married people.

Employers should bear in mind the following list when wording their job advert:

  • Never refer to ‘young graduates’ or ‘bright young thing’ or ‘mature applicant’ as they are all ageist.
  • You should always put adverts in publications that will reach the widest spectrum of people and don’t exclude men or women or a particular racial group.
  • Don’t stereotype men and women in a job advert.
  • Be careful about recruiting by word of mouth as this could restrict members of a certain race or sex.
  • Never make the length of residence in, or experience of, the UK a requirement of the job.
  • If a qualification is essential to the job, then don’t restrict it to a UK qualification.
  • You must not state or imply that a job is unsuitable for a disabled person unless there is a very clear job-related reason.
  • You must not state or imply that reasonable adjustments will not be made for a disabled person unless there is a very clear job-related reason.

Now you know what you should avoid putting in an advert. But what sort of things can you put in?

What to include in a job advert 

It’s important to have a written job description. You can use this to specify the most important duties and requirements of the post and use it to form the basis of your advert. The advert should include:

  • The qualifications and experience required
  • Any specific skills required
  • Experience with specific equipment
  • The salary and benefits offered
  • The person to contact
  • The required references

When you can discriminate legally in a job advert

It’s possible to legally discriminate in a job advert, if it’s a requirement of the job that the applicant is from a certain group; for example, only over 18s can sell alcohol.

You should consider including in your advert a statement of commitment to equal opportunities. This will show that you welcome applicants from all sections of the community.

If you want more in-depth expert information – from an employment lawyer – on how to employ someone, then read our guide Employment Law Made Easy. Packed with tips and expert advice on complying with employment legislation.

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Regulations you must know before letting property

Lawpack on March 27, 2020

There are numerous legislations relating to the renting out of property and you, as a landlord, need to be sure that all of them have been complied with before you get that tenancy agreement signed. There is another very good reason why you will want to ensure that your property is in good condition before it is let: it’s far more likely to attract a good tenant in the first place, and it’s notoriously difficult to carry out rectification works with tenants in occupation.

1. Get permission

You should make sure that you’re legally allowed to let the property; for example, you may need written permission from:

  • Your mortgage company
  • Your landlord, if you’re letting a leasehold flat
  • Your insurance company, to check that renting is permitted.

You should also check that planning permission isn’t required (this is particularly important if the property can be classed as a House in Multiple Occupation (HMO)) (see ‘licensing’ below). If any building works have been completed, you may need building regulations approval.

2. Get a licence, if necessary

If the property has five or more unrelated tenants and is three or more storeys high, then it will almost certainly be a House in Multiple Occupation (HMO) and you will probably have to obtain a licence from your local authority. If you think this may apply to you, you should speak to your local authority before taking on any tenants (and preferably before doing any building works). More information on HMOs can be found in Lawpack’s book, The Complete Guide to Residential Letting.

3. Get the property into a good condition

A property must be in good condition and have no ‘category 1’ hazards at the time that it’s let. ‘Category 1’ hazards relate to the Housing Health and Safety Rating System set up under the Housing Act 2004, where local authorities are given powers to inspect properties and determine whether they contain any ‘hazards’. These all relate to health and safety; for example, damp and mould, excess cold (i.e. insufficient heating) and the tenant being in danger of having a fall. This is a complex subject.

Do note that during the tenancy, you, as the landlord, will be responsible for the maintenance of the structure and exterior of the property and for the installations for the supply of water, gas, electricity and for sanitation, and for the installations for the supply of space and water heating (Section 11 of the Landlord and Tenant Act 1985). You should, therefore, make sure that all of these are in good repair at the time of letting, to minimise any repair works during the tenancy.

4. Check that the gas appliances are safe

If there are any gas installations at the property, you must have an inspection carried out by a Gas Safe-registered gas installer, and then annually thereafter. The installer will provide a certificate and you must give a copy to the tenant. For more information, speak to your local Heath and Safety Executive which administers these regulations.

5. Check that the furniture is fire resistant

All furniture must comply with the furniture regulations, be fire retardant, and carry the proper labels. If you furnish your property with new furniture, you should be all right, particularly if you use one of the companies which specialises in providing ‘packs’ of furniture for landlords. Further guidance on the regulations can be obtained from your local Trading Standards Office.

If your property is an HMO, then you must comply with fire safety law by carrying out a fire risk assessment in the common areas and identifying the general fire precautions you need to have in place.

6. Maintain the electricity supply

Strangely, there is no requirement for regular inspections (as there are for gas appliances) unless the property is an HMO, where it will need to be inspected every five years. However, landlords are responsible for maintaining the condition of the installations for the supply of electricity under their general repairing covenants in section 11 of the Landlord and Tenant Act 1985.

7. Make sure that the property is safe

There are also regulations which cover general safety in the property; for example, there should not be any slippery rugs or ladders with broken rungs. Electrical appliances must also be safe and if these are not new, it’s wise to have them inspected and checked before and between lettings. Plugs must be properly sleeved and sockets safe. Again, the Trading Standards Office can provide useful leaflets regarding these matters.

8. Other obligations

Landlords must provide their tenants with an Energy Performance Certificate.

In England, they must also:

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A guide to employing temporary workers

Lawpack on March 27, 2020

Employers hoping to take on temporary workers could benefit from downloading a solicitor-approved temporary employment contract template that highlights your obligations to temporary workers as outlined by employment law.

The benefits of temporary working

Temporary workers are those employed on a short-term basis to fulfil certain duties, perhaps within a given time frame. One of the main benefits of employing a temporary worker is that they can be used to help companies meet demand for products or services during busy times of the year, for example at Christmas.

Employers must ensure that the worker has the appropriate qualifications required for the role where necessary.

The legal aspects of employing temporary workers

Temporary workers may be employed on a fixed-term contract which allows them to work either until the task is complete or up until a specified termination date. This matter will be decided when the employment contract is drawn up and the employer must comply with the agreement.

As such, employers would not be within their rights to terminate the contract ahead of time if the understanding was that the worker would continue to an end date. That is as long as they had no valid reason to terminate the agreement, such as in instances of misconduct.

Fixed-term contracts may also end when a specified event does or does not take place.

The employment rights of temporary workers

Unless there are outstanding circumstances, temporary workers on a fixed term are entitled to the same working conditions as their permanent employee counterparts after 12 weeks in the job. This means that they should receive the same pay, holidays, rest periods and working hours as everyone else employed by the company.

According to the Fixed-term Employment (Prevention of Less Favourable Treatment) Regulations, any employee on a fixed-term contract for four or more years is typically defined as a permanent employee by law if their contract is renewed or they are given a new fixed-term contract to fulfil by the same company.

There are exceptions to this provision, such as if the company needs to lengthen the extent of the original contract beyond four years under a collective or workplace agreement.

Fixed-term employees are subject to the same tax arrangements as permanent employees and in instances where the employers employ the worker directly, it is up to the employer to ensure that all the relevant paperwork is in order.

Employing temporary workers through an agency

If you employ a temporary worker through an agency, there are other pros and cons regarding quality, pay and paperwork.

Because the agency has hired the candidate itself, it means that they have been subject to their levels of scrutiny. This could mean that their suitability to the role is not within the same standards set by you. For this reason, it is a good idea to shop around with agencies and uncover the one you feel has exercised the most rigorous recruitment procedures. This would mean questioning the agency about the process and perhaps seeking evidence of their procedures.

The agency is responsible for ensuring that the temporary worker receives their rights under the Working Time Regulations and national minimum wage law. This reduces the onus of responsibility on you.

You will not pay the temporary worker directly but will pay the agency instead, who will take into account national insurance payments and holiday and sick pay on their bills. It could prove a more costly expense than employing the worker directly, after administration fees and profit margins are added to the expenditure.

As the employer, you need to forward your work and pay conditions to the agency which will ensure that these rights are passed on to the employee.

As employment law does not distinguish between permanent and temporary workers, they are entitled to the same pay and working conditions as those in the same or similar roles, qualifying for certain employment rights once the minimum period of continuous employment has been reached.

For more information about temporary workers, download Lawpack’s temporary employment contract form.

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Applying for confirmation: Completing Form C1

Lawpack on March 27, 2020

If you want to administer an estate when someone has died in Scotland, you may need to apply to the Sheriff Court for confirmation (the Scottish equivalent of ‘probate’) so you have the authority to sort out the deceased’s affairs.

Do you need a grant of probate?

This depends on the size of the deceased’s estate and the kinds of assets in it.

Normally, a grant of probate is required if the value of the deceased’s estate (after paying the funeral account) is over £5,000.

Find out more on when a grant of probate is needed.

Applying for confirmation without a solicitor

To apply for confirmation yourself you need to complete and send a variety of probate forms to the Commissary Department of the Sheriff Court, which outline to the Sheriff Court what the deceased’s estate is worth.

Probate forms used to apply for confirmation in Scotland

To apply for confirmation in Scotland, you must complete the following probate forms:

  • Form C1 – the form of application for confirmation in Scotland, receipted where inheritance tax is payable
  • Form C5, if the gross value of the estate for inheritance tax is less than the inheritance tax threshold (£325,000) or is less than £1,000,000, and there is no inheritance tax to pay because of spouse, civil partner or charity exemption
  • Form IHT400, if the estate is not exempt from inheritance tax

Completing Form C1 – Confirmation Application Form

In the confirmation application form C1, the following information is requested:

Details of the deceased

  • The deceased’s name, address, occupation and date of birth and death

The executor

  • The executor’s name and address
  • The declaration of the executor(s) as to the accuracy of the information contained in the confirmation form

The deceased’s estate

  • An inventory of each item of estate and its value
  • A summary of the debts and expenses

Taxes

  • The taxable value of the estate. If the estate is taxable, Form C1 must be stamped by HMRC to show that all tax assessed has been paid, before the Sheriff Court will accept the form and progress the application for confirmation. The estate isn’t taxable if it qualifies as either an excepted estate, or an exempt and excepted estate, but whether taxable or not, a further form must be completed and submitted to HMRC to allow it to satisfy itself as to the position (either Form C5 or Form IHT400).

In Scotland Form C1 and Form C5 need only be signed by one of the nominated executors.

Sending Form C1 to the Sheriff Court

If inheritance tax is payable, Form C1 and Form IHT400 should both be first submitted to HM Revenue & Customs. Form C1 will be receipted by the HMRC and returned to you, allowing you to apply for confirmation from the Sheriff Court.

Application for confirmation is made to the Sheriff Clerk of the Sheriff Court in the area in which the deceased had been domiciled at their death.

Get expert guidance on applying for confirmation, plus the confirmation forms you need, with Lawpack’s DIY Probate Kit.

 

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Annual General Meetings (AGMs)

Lawpack on March 27, 2020

There is now no longer any legal need for a limited company to hold an Annual General Meeting (AGM), unless the limited company’s Articles of Association require the company to do so.

This means that, unless the limited company’s Articles of Association says that you, as a limited company director, must hold an Annual General Meeting, if you don’t wish to hold one, there is no action you need to take. But, as limited company directors, there is nothing stopping you from holding AGMs if you want to.

Where the Articles of Association require AGMs of shareholders to be held, they must be held within 18 months of the limited company’s formation and thereafter annually, with no more than 15 months between each Annual General Meeting.

Traditionally, the AGM is the medium used to lay the annual accounts and directors’ and auditor’s reports before the shareholders, and to deal with other matters such as the re-election of any company directors retiring by rotation and the annual appointment of auditors.

Under the Companies Act 2006 the annual accounts no longer need to be presented to the shareholders in a meeting and can be sent to the shareholders instead.

The annual accounts must either be presented to the limited company members at a general meeting, or sent to the members within nine months of the end of the year end, or if earlier, the date of filing with Companies House. Related Articles:

DIY Probate: Is inheritance tax due on the estate?

Lawpack on March 27, 2020

When you’re probating an estate, it’s necessary to work out which probate forms should be completed from an inheritance tax perspective. It’s essential on every grant of probate application to complete an inheritance tax form, irrespective of whether inheritance tax is payable.

Estates exempt from inheritance tax

To assist with the proper completion of the applications for a grant of probate or confirmation and the appropriate returns to HMRC (to calculate whether inheritance tax is due on an estate), the executors must first determine if the estate qualifies as an ‘exempt’ estate, or as an ‘exempt and excepted’ estate, or if neither category applies.

This will dictate how to complete certain parts of the applications for a grant of probate and which probate form is to be used to return the relevant inheritance tax information to HMRC.

For inheritance tax, the value of the estate for the grant of probate or confirmation is only one component of the gross estate and if the deceased made substantial gifts during their lifetime, or received income from a substantial trust, or where certain other circumstances apply, this can result in an inheritance tax liability even if the estate assets don’t exceed the inheritance tax threshold.

Where the deceased was domiciled in the UK at death, the estate is an ‘excepted’ estate or an ‘exempt and excepted’ estate where either:

  1. Excepted estate – the gross estate for inheritance tax doesn’t exceed the excepted estates limit (currently £325,000 and linked to the level of the inheritance tax threshold).OR
  2. Exempt and excepted estate – (a) the gross value of the estate is less than £1,000,000 and (b) because all or part of the estate passes to the deceased’s spouse who must also be domiciled in the UK, or to a charity or other body qualifying as exempt from inheritance tax, after deducting liabilities and those exemptions only, the estate is less than the excepted estates limit.

In addition, for both categories all of the following conditions apply:

  1. If there are any ‘specified transfers’ (see below), their total chargeable value doesn’t exceed £150,000.
  2. If the deceased had made a gift of land or buildings, it was made to an individual and not to trustees of a trust or to a company and it didn’t exceed £150,000 in chargeable value.
  3. If the estate for inheritance tax purposes includes assets held in a trust that are treated as part of the deceased’s estate, there is only one such trust and the total value of those assets doesn’t exceed £150,000.
  4. If the estate includes any foreign assets, the total gross value of these doesn’t exceed £100,000.
  5. The deceased didn’t give away any property whilst retaining the benefit of it.
  6. The deceased had elected that the income tax charge shouldn’t apply to: (a) assets they previously owned in which they retained a benefit or (b) the deceased’s contribution to the purchase price of the assets acquired by another person but in which the deceased retained a benefit.
  7. The deceased didn’t benefit from an alternatively secured pension fund.
  8. The deceased didn’t benefit under a registered pension scheme where (a) the benefit was unsecured and (b) they became entitled to the benefit as a relevant dependant of a person who died aged 75 or over.

To qualify as ‘specified transfers’, the assets given away can only be:

  • Cash
  • Quoted stocks and shares
  • Household and personal goods
  • Land and buildings

Any gift of land and buildings only qualifies as a specified transfer if it was an outright gift between individuals. If the gift of land and buildings was to a trust or a company, or the deceased kept back any kind of benefit from the property or was entitled to use it, it cannot qualify as a specified transfer.

If you’re not sure whether any transfers made by the deceased fall within these exceptions, you should contact the HMRC Helpline (tel: 0845 30 20 900) or seek professional advice.

Having determined if the estate qualifies as exempt or exempt and excepted, the executors are now in a position to complete the probate forms appropriately.

Get expert guidance on applying for probate, plus the probate forms you need, with Lawpack’s DIY Probate Kit.

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How to call and run a shareholders’ meeting

Lawpack on March 27, 2020

When you’re managing a limited company, most of the day-to-day running of a limited company is carried out by you and the other company directors. So you won’t really need to worry about holding shareholders’ meetings, unless a very important issue arises.

Occasions when you may need to hold a shareholders’ meeting are if issues arise concerning capital or changing the limited company’s constitution, which are issues decided by the shareholders.

In some cases directors and shareholders of a limited company will be the same people.

Limited company shareholders act officially as a group. This means that you can either call or arrange for the shareholders to sign a written company resolution or respond to an email.

Certain rules and procedures have to be followed in order to call and conduct a shareholders’ meeting:

Notice given for a shareholders’ meeting

Shareholders must receive advance warning of shareholders’ meetings:

  • Each shareholder entitled to attend the shareholders’ meeting must receive notice of all shareholders’ meetings. Each shareholder should be notified of the date, time and place and full details of the proposed company resolution to be considered at the shareholders’ meeting. The notice may be sent by post or electronically. If the details are shown on the limited company’s website, the shareholder must be sent a letter or email drawing his/her attention to it.
  • Each shareholder must receive his/her own notice of the shareholders’ meeting. The length of notice is now 14 days.
  • It’s possible for shareholders’ meetings to be held at short notice, provided the requisite majority of shareholders have consented to short notice. This consent must be recorded and signed in writing.
  • In most cases you will be able to hold the shareholders meeting immediately if you obtain the shareholders’ consent to short notice. (An example template of the Consent to Short Notice Form is included in Lawpack’s Limited Company Formation Kit.)
  • Consent to short notice may be given:
    • in the case of an annual general meeting (AGM), by all the limited company members entitled to attend and vote at the shareholders’ meeting; and
    • in the case of general meetings, by a majority in number of the limited company members holding not less than 90 per cent in nominal value of the shares and having the right to attend and vote at the shareholders’ meeting.

Shareholders’ meeting proxy

Each limited company shareholder may appoint someone to attend the shareholders’ meeting on their behalf (a proxy), if they’re unable to attend. The proxy may attend and speak at the shareholders’ meeting and vote on a poll on the shareholder’s behalf. The proxy may now vote on a show of hands.

The notice calling the shareholders’ meeting should inform shareholders that they are entitled to appoint a proxy to attend, speak and vote in their place and that the proxy need not be a shareholder.

The proxy form must be lodged with the limited company within a specified period before the shareholders’ meeting is held (this period cannot be longer than 48 hours).

Shareholders’ meeting quorum

Shareholders act collectively, and not individually, so a certain number of shareholders must be present before a shareholders’ meeting can be held. This is known as a ‘quorum’. Normally, a minimum of two shareholders present either in person or by proxy constitutes a quorum. But in the event of the limited company only having one shareholder, s/he will not unnaturally form a quorum.

Company resolutions are passed by a majority of the shareholders at shareholders’ meetings.

Voting at a shareholders’ meeting

Shareholders vote to make their collective decisions. The vote which takes place at the shareholders’ meeting can be made in one of two ways:

  1. On a show of hands — every shareholder present at the shareholders’ meeting in person is entitled to cast one vote. Proxies are now entitled to vote on a show of hands.
  2. On a poll — every shareholder present at the shareholders’ meeting shall be entitled to cast one vote for every share held. Proxies can vote on a poll.

The number of votes required to pass a particular item depends on whether the company resolution is an ordinary resolution or special resolution.

Ordinary company resolutions

Ordinary company resolutions proposed at a general meeting must be approved by a simple majority (i.e. more than 50 per cent) of the votes cast at the shareholders’ meeting, whether by a show of hands or on a poll.

Two examples of many types of limited company business which must be approved by ordinary company resolution include:

  • Declaring a bonus issue.
  • Removal of a limited company director.

Special company resolutions

Special company resolutions must be passed by a three-quarters majority of the votes cast at the shareholders’ meeting, whether by a show of hands or on a poll.

Examples of limited company business which must be approved by special company resolution are:

Some ordinary company resolutions and all special company resolutions must be filed at Companies House within 15 days of being passed. Sometimes forms and fees must also accompany the company resolutions.

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