Forming a company is a simple enough process and one you can complete in just a couple of hours. However, closing a business can be a different matter entirely without professional help.
The starting point when closing your company is whether the closure is where your business is still solvent or whether it is insolvent. It’s not always clear what the answer is and we can help you get a clearer picture as well as provide an experienced company closure service, including liquidation via our Insolvency Practitioners.
If your company has debts or is insolvent, you cannot liquidate the company yourself. In order to ensure fair play for creditors, Insolvency Practitioners are the only ones who can do this. They will likely recommend you a creditors voluntary liquidation, as the appropriate method.
If the above applies to you, please do get in contact. Our team of experienced Insolvency Practitioners help hundreds of small business clients like you close their companies down each year.
For solvent companies with assets who want to close a company in a tax efficient manner, a members voluntary liquidation is the right choice.
Where a company hasn’t traded in at least 3 months, a process known as strike off, or dissolution, may be appropriate. This means you can simply notify Company’s House that you wish to have it removed from their official register. Providing you fulfill the criteria, it is the cheapest way of doing things.
If you want peace of mind and to avoid hassle, please do call us, use the live chat or fill in the contact form. We’ve got you covered as 1 of the UK’s leading company closure services.
Read on to find out about the different ways a limited company can be closed.
How to Close a Company
If you choose to close (also known as winding up) your company down, you need to understand the procedure. You must apply to Companies House to have it voluntarily wound-up and struck off the register. You can only have your company struck off the Companies Registrar if:
- Your company hasn’t traded or sold any stock in the last 3 months
- Hasn’t changed names in the last 3 months
- Isn’t threatened with liquidation
- Has no agreements with creditors, e.g. a company voluntary arrangement
- There are no existing debts
If your company doesn’t satisfy the above conditions, you will have to voluntarily liquidate the business instead.
Process for closing a Company
HMRC’s page on the regulations is here.
UK law differs depending on whether your company is solvent or insolvent.
Practical steps needed for company closures
In addition to the formal processes needed to close a climited company business, there will be a number of other actions needed, including some, if not all of the following :
- Paying staff or making employees redundant.
- Sale of company assets
- Terminating contracts for utilities and notifying other providers such as the Council
- Preparation of the final company accounts and tax returns and paying any sums due
- Notify HMRC in relation to payroll, VAT, if applicable and any other taxes that may apply to your business
- Closing the company bank accounts
How Much Does it Cost to Close a Business?
Submitting a DS01 form to Companies House to close a company, where possible, comes with a mere £10 filing fee.
Read our full article here on The Costs of Closing a Limited Company. A formal liquidation costs vary widely depending on the size and complexity of the case, but £5000-£7000 would be a reasonable approximation for liquidators fees and court costs if the matter is not especially complicated
You’ll need to ensure your accounts are completed from the last yearly accounts filed until the final day of trading. Submit these to HMRC, along with a request to close the corporation tax account.
Tell HMRC you wish to stop being an employer here, and submit a final P35 Employer’s Annual Return. You’ll also need to ensure you’re fully paid up regarding you PAYE and National Insurance contributions.
If you’re VAT registered, tell HMRC you’re deregistering here.
Since corporation tax, payroll and VAT are three completely independent departments within HMRC, it is necessary to contact them all separately. All tax returns should be filed.
Companies House have a close relationship with HMRC so once you’ve done this, striking the company from the register will be the final step to alert HMRC that this business no longer exists.
Closing a Solvent Company via Members Voluntary Liquidation
If your company is solvent with assets, you can close the business using a members’ voluntary liquidation. This is appropriate if:
• Company Directors Wish to Retire
• You wish to step down from a family business and no one else wants to run it
• You want to pursue another career path
• You want to release assets/cash from the company tax efficiently
Close Company which is dormant or never traded
If the company is dormant or never trade, closing the company should be straightforward. Once the directors have agreed, submit the application for Strike Off using form DS01. After it’s been advertised in the Gazette, and waited out the mandatory 3 month objection period it will be struck off the register and cease to legally exist.
Will Closing a Company Affect the Director Personally?
As long as the director has not behaved improperly, the closure will have no impact on any future business activities.
Can I Close a Company and Start a New One?
The answer is that you can start another business providing all the requirements of Companies House are adhered to.
What HMRC is keen to prevent, however, is the process known as phoenixing, whereby a liquidated company rises from the ashes with the same or similar name, but within a new limited company structure.
This is prohibited by Section 216 of the Insolvency Act.
You can’t for example, use the same company name again.
How to Close a Company With Debts
If you want to shut down your business where it is unable to pay its bills, you will need to initiate a creditors voluntary liquidation. A director of a company can propose a creditors voluntary liquidation if:
The company must also hold a creditors’ meeting within 14 days of passing the resolution. Creditors must be given at least 7 days notice of the meeting, which must also be advertised in the Gazette. A Statement of Affairs must be presented to creditors during the meeting which summarises the company’s assets and liabilities. A summary should also be given to the liquidator.
When all assets have been converted into cash and creditors repaid in order of priority, the company will be struck off 3 months after the liquidator has held a final meeting.
Be careful to check for an overdrawn directors’ loan account as this can be quite serious once a company has become insolvent.
Striking Off a Company with Debt
If you attempt to strike off your company with outstanding debts to HMRC or another creditor, they will likely raise an Objection to Company Strike Off. This is a formal objection which tells you that you are forbidden from closing the company until your debt is settled.
If you are unable to settle your tax arrears, there is the possibility that they will compulsorily liquidate your company. If HMRC is the creditor, they will often do so not because the sums of money are meaningful to them, so much as to make an example. So if you’re in this situation, it is wise to seek advice immediately.
How Long Does it Take to Close a Company?
Assuming the company is simply being struck off the register at Companies House, expect a time frame of around 3 months before you receive confirmation.
Liquidation is likely to take much longer, especially if there are assets to dispose of.
Get in touch if you Would Like Our Help With Closing Your Limited Company
If you want help liquidating your company voluntarily, or fear you will be handed a winding-up petition by a secured creditor or HMRC, you should contact Company Debt at your earliest opportunity.
We can put the provisions in place to help you wind up your business seamlessly, or act quickly to help you avoid a compulsory liquidation.