Closing a Limited Company

How to close a Limited Company

There are many reasons why you may be looking to close down your limited company: to retire, go back to full-time employment, or perhaps you would like to go back to being a sole trader. Farnell Clarke can help explain the journey to closing your company and what is involved. We are committed to providing a great service right until the very end.

The Process

You must inform anyone who could be affected and follow the rules if you make staff redundant. According to HMRC, you must keep business documents for 7 years after the company is struck off. Including, bank statements, invoices and receipts.

VAT

We can help de-register your VAT and notify HMRC.

PAYE

If you operate a PAYE scheme Farnell Clarke can help close the scheme, complete final filings and issue any P45s to your employees.

Disposal of Assets

If the company has any assets from laptops to cars, you will need to decide how these are disposed of and we can calculate if there are any resulting tax effects.

Close Bank Accounts

Before your company is closed you will need to close your accounts. Farnell Clarke will let you know when to do this throughout our company closure service.

Closure/Informal strike-off

To strike off your company from Companies House, a company director needs to complete a striking off form (DS01). When this has been received, Companies House will publish a notice in an official public record (The Gazette) in London, Edinburgh, or Belfast, to provide official notice to any third parties who may object to the closure (of course, if you haven’t traded, this shouldn’t be much cause for concern).

You cannot apply for a strike-off until 3 months after your final period of trade. If no objections are raised, Companies House will confirm the closure of your company in the Gazette when three months have passed. Just remember to transfer your company assets before you close it down; when a company is struck off, any bank accounts are frozen, and any balances are taken by the Crown.

Members Voluntary Liquidation

A Members Voluntary Liquidation (MVL) could be a tax-efficient way of unlocking cash from your business so that your remaining profits are fairly distributed to shareholders as capital, and not dividends. The main advantage of liquidating your company through an MVL is the ability to extract all of the assets from the company subject to Capital Gains Tax, rather than Income Tax. This could mean more money in your pocket.

However, the cost of closing via an MVL starts at around £5,000, which normally only makes it a viable option if you have a lot of retained profits left in the company at the point of closure. Closing a company this way will impose restrictions on future companies within a time-period if you have claimed entrepreneurs’ relief. It is therefore worth considering your future plans.

Make your limited company dormant

If you think you might want to trade through your limited company in the future, you always have the option of putting it ‘on hold’. Instead of informing HMRC that you intend to close the limited company down, you can make the company “dormant”.

You’ll still have to file certain tax returns, but they’ll be ‘nil returns’, meaning you just report a load of zeroes to HMRC to show them you’re not trading. Farnell Clarke can still assist with those future filings and keeping all the compliance boxes ticked on an annual fee basis.

If you decide to close a company Farnell Clarke can help with the following…

Assess your options – We will advise on when your company can be closed, and which route is best for your individual circumstances.

Fees – We will assess your monthly fee and confirm any others in relation to the closure of your company. Our starting price is £75 plus VAT for our strike off service

Ongoing filing obligations – You may need to still complete future tax returns and we will advise you of these too and send a new proposal for future filings.

Updates – We will keep you up to date throughout the entire process from what work is outstanding to when to close your bank account. So, you can sit back and relax…

12 Step Checklist

• Decide how and when you will close
• Pay outstanding tax liabilities
• Dispose of assets
• De-register your VAT
• Inform anyone who could be affected
• Follow the rules about employees
• Close the PAYE scheme
• File all accounts
• Close bank accounts
• Inform HMRC
• Gazette notice
• Keep records

Take a look at some of our other useful and handy guides for your business.