There comes a time in our lives when we start to wonder whether we should quit the day job to spend our days in a more restful way. There’s probably a once in a lifetime trip you’re ready to take, sunnier climes you’d like to live in, or perhaps it’s time for a professional change of scene.
Clearly, there are plenty of reasons why you might want to close a consultancy company, and whether you’re having a temporary hiatus, or ending your time as a consultant altogether, there are a number of options available to you. It is always advisable to seek professional assistance when closing your limited company, but this overview of your options should give you the background information you need.
Strike off your business
If you’re sure you want to close your consultancy company then striking your company off the Companies Register is one of the options available to you. The process is cheap, costing only £10, so that’s a definite plus. It’s also relatively simple, as long as your business fits certain criteria and you take the necessary steps to close the business down legally.
This process can only be used if the company:
• Hasn’t traded or sold any stock in the last three months;
• Hasn’t changed names in the last three months;
• Isn’t threatened with liquidation;
• Doesn’t have any agreements with creditors such as a company voluntary arrangement (CVA).
If the company doesn’t meet these criteria when considering how to close a consultancy company, you’ll have to use a members’ voluntary liquidation instead. Be aware the rules have changed regarding MVLs and they are scrutinised more closely than they were for tax avoidance.
To strike the business of legally, you must send a copy of your application to strike-off to anyone who could be affected i.e. shareholders, employees, trustees etc. within seven days. Any employees must be paid what they are owed and the redundancy process must take place in the proper way.
You’ll also need to inform HMRC that the company has ceased trading and you wish to close your consultancy company and send the appropriate documentation from Companies House. Once your PAYE and National Insurance contributions are fully paid up and up to date, you can then ask for the company’s payroll scheme to be closed down. Be aware if you do not inform all relevant departments of HMRC they will automatically object to any proposal to strike off.
The next job is to distribute any assets among the shareholders and file final statutory accounts and a company tax return with HMRC. Business records and accounts should be kept for six years after the end of the relevant accountancy period to avoid potential problems further down the line. Under the Bona Vacantia rules, any assets remaining when the company is dissolved will pass to the Crown (including any bank balances), so it’s important you administer this process properly. Follow these steps and this is the cheapest and simplest way to close down a one-man consultancy business.
Usually, something goes wrong whether it is the loss of a contract; sudden illness or something else it is critical to keep your taxes up to date and not to continue taking dividends. By continuing to take dividends when the company cannot pay its tax bills is a very big mistake and could cost you, dear. Any dividends were taken whilst the company is insolvent may mean they will have to be repaid and you will need specialist insolvency advice. If HMRC decides to close your company by way of legal action and threat of winding up you must seek insolvency advice immediately to better protect yourself and family.
Making your Company Dormant
Alternatively, if you’d rather take an extended break from your consultancy business rather than striking it off entirely, you’ll probably be better served by leaving the company open.
You can do this by making your company dormant. You will need to inform HMRC of your intentions by writing to your local corporation tax office and stating the date the company became dormant. You’ll then be sent a ‘Notice to deliver a Corporation Tax return’ for the period up to this date.
To make a one-person consultancy company dormant, you will have to:
• Pay any outstanding bills and cancel any contracts such as insurance, utilities, leases of buildings or equipment, insurance and telephone or internet services;
• Make sure you’ve received all the payments you expect from customers and terminate any agreements for the provision of products of services;
• Pay any outstanding VAT due to HMRC and cancel the company’s VAT registration;
• Pay any final wages to employees (if you have them) and close the company’s payroll scheme;
• Close down any company bank accounts to ensure no interest is paid to the dormant company.
The slightest divergence from this process, such as continuing to pay for utilities or insurance, will prevent the company from being seen as dormant in the eyes of HMRC, and you will have to file normal company accounts as a result.
Please follow the link to Part 2 of our guide to learn more about making your company dormant and the other options available to close your consultancy business down. For more information on closing your company appropriately call 08000 746 757, or email: firstname.lastname@example.org, or use the live support on the lower right-hand side.