Stanley Davis Group News

Update of Changes to the PSC Regime

We are informed by Companies House that changes to Persons with Significant Control (PSC) regulation may well take place in late June this year.

At present, updates on a company’s PSCs are made once a year on the annual confirmation statement, unless the company has elected to keep its PSC register at Companies House. The new rules will make any PSC changes an ‘event-driven filing’ much like a change of director which must be notified as the event happens. The main difference will be that, whereas the form for a change of director must be filed within 14 days of the event, there is a suggestion that the time limit for a PSC change will be up to 6 months.

Since PSC information became compulsory on the confirmation statement last year, it is clear to us at Stanley Davis Group, that the rules are widely misunderstood. Our experience suggests that a very significant proportion of companies have incorrect PSC registers and the latest proposals will lead to yet more confusion and, given the six-month time limit, will not have a massive effect on improving the accuracy of the register.

The Government consultation on the subject has now closed and we are awaiting the formal outcome.

Four Reasons to incorporate your buy to let business based on legislation changes from April 2016

Please note announcements in the budget 16.03.2016 will probably not be confirmed in law until about late autumn and some may change.

  1. Limited companies will not lose tax relief on mortgage interest like individuals.
  2. Companies pay corporation tax, currently 20% and it is proposed to reduce this to 17% over the next few years. This is very attractive compared to, currently, 40% for higher rate payers and 45% for additional higher rate payers.
  3. Money can be taken out of a company by salary, subject to pay as you earn tax and national insurance contributions and realism.
  4. An alternative method is by way of dividend. However, the rules are changing from April 2016. From then on the first £5,000 is tax free, any amount in excess of this will be charged at 7.5% for a basic rate payer, 32.5% for a higher rate payer and 38.1% for an additional higher rate tax payer.

This brief summary indicates that for longer term investors, forming a limited company and holding shares rather than properties in your own name can be advantageous as there will be lower corporation tax rates payable until the investor is ready to realise the investment. In addition, the investor can choose the timing for realisation. This in itself could be easier as a time could be chosen when the investor might have no other or low taxable income and can pay themselves a salary, subject to rules set down by HMRC.

The properties do not have to be sold if you wish to realise your investment as, simply, one sells the shares in the company and you can obtain capital gains tax relief, currently £11,100.

To form a company call Lyn Bond at Stanley Davis Group, 020 7554 2214

The PSC Register – Key Facts to know before the 6th April

From April this year both private companies and Limited Liability Partnerships will have to create a new public register of People with Significant Control (PSC register). This was included in the Small Business, Enterprise and Employment Act 2015 in order to create greater transparency in the ownership and control of UK companies by allowing a full picture of both legal and beneficial ownership of businesses to be made public. This will come into force on 6 April 2016, and from 30 June 2016 the PSC register will have to be included in an annual filing at Companies House.

Stanley Davis Group will be launching a new online company formation process to coincide with the start of the register with capability to capture and file the PSC register upon incorporation.

What is a PSC?

A PSC can be an individual or a UK registered company described in the guidance as a “Registrable Legal Entity”. There are 5 conditions for being a PSC which are set out in the Act. As they apply to companies, they are:

  1. Directly or indirectly owning more than 25% of the shares;
  2. Directly or indirectly holding more than 25% of the voting rights;
  3. Directly or indirectly holding the right to appoint or remove the majority of directors;
  4. Otherwise having the right to exercise, or actually exercising, significant influence or control; and
  5. Holding the right to exercise, or actually exercising, significant influence or control over activities of a trust or firm which is not a legal entity, but would itself satisfy any of the first four conditions if it were an individual.
Table: Summary of PSC Information relating to an individual (Source Companies House)

How do I file a PSC Register?

From June 2016 companies will have to file details of their PSC register annually with Companies House as part of the new “check and confirm” process which will replace the old Annual Return

What if the PSC does not want personal information made public?

Personal information must be safeguarded as identity theft and fraud can occur using date of births and address information.

The service address will be made public so it may be preferable to use a non-residential work address. If no such work address exists for the PSC, Stanley Davis offers a service address facility

What are the key requirements for companies and PSC’s?

The new legislation requires a company subject to the PSC regime to:

  1. identify any PSCs in relation to the company and confirm certain information about them;
  2. record the details of the PSC(s) on the company's register;
  3. file their information annually with Companies House; and
  4. update the information on its own PSC register when the information changes and update the information at Companies House when the time comes for the company's annual filing.

If the company cannot immediately determine the identity of its PSC(s), it must take "reasonable steps" to identify them, and record the status of its investigations.

Individuals who are PSCs in relation to a company are themselves under a corresponding duty to notify the company of their status and to respond to any notices from the company seeking confirmation of their status.

Companies (and their officers) and PSCs are subject to criminal offences for failure to comply with their obligations. Failure on the part of a PSC to provide PSC information will give the company the option of placing restrictions on the PSC's interests in the company, so that voting rights, dividends and other rights will be suspended in relation to those interests. A company may also give notice to other persons it knows or has reasonable cause to believe know the identity of a PSC (or other person likely to have that knowledge) and those other persons also commit a criminal offence for failure to comply.

If you have any concerns or questions about the confidentiality aspects of the new PSC regime, or would like to discuss anything at all that may be of your or your clients’ concern, please do not hesitate to contact the author of this article Andrew Davis.

andrew.davis@stanleydavis.co.uk

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