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A business wishing to become a limited company may instruct a solicitor, accountant or specialist company to either form one on their behalf, or purchase a ready-made company ‘off the shelf�. The solicitor etc will register the company at Companies House and pay any fees on the client’s behalf.

The service by the solicitor etc of forming a new company is standard rated. However, if the business gives instructions for the limited company to be formed before its registration takes place, any registration fee/capital duty paid by the solicitor on behalf of the business and recharged to them is a disbursement and so is not consideration for any supply for VAT purposes.

Ready-made companies

Since forming a new limited company can take several weeks, some company registration agents form a number of companies on a speculative basis. They hold these companies in stock, which allows customers to acquire a company registration quickly if needed.

In forming such ‘off the shelf� limited companies, the agent is not acting on the instructions of a client. Therefore any registration fee/capital duty paid by the agent cannot be passed on to an eventual client as a disbursement. Rather it forms part of the standard rated supply of the ready-made company to the client. This rule also applies to the sale of existing shares which cannot be exempt in these circumstances.