Welcome to part 2 of our how to close a consultancy company. We’ve already discussed striking off a company in part 1 and are now exploring the option of making your company dormant.
Do you have to tell Companies House when you close a consultancy company? And what about your dormant company?
Once you have told HMRC about your dormant business, you will usually receive confirmation of your dormant status within three weeks. At this point, HMRC will no longer consider your business to be active, so you should start to receive less correspondence. You also shouldn’t need to contact HMRC until you start trading again.
You will not have to tell Companies House about the dormancy until it’s time to file your annual accounts. Accounts will need to be filed right up to the start of the period of dormancy. For the first full accounting period in which the company is dormant, you will also need to submit dormant company accounts to Companies House within nine months of your company accounting reference date.
On an ongoing basis, you will also need to meet a number of Companies House filing obligations, including:
• Preparing and submitting an annual return, which you can learn more about here;
• Submitting the appropriate forms when a new company director or secretary is appointed or their names change;
• Informing Companies House of any changes to the address where the company is registered and its records are stored.
How do you make a dormant company active again?
The process of making a dormant company active is a relatively simple one. If you want to start trading again, you must tell HMRC immediately and put together statutory accounts and company tax returns after the company’s year end.
Once the company is up and running again, your reporting dates will stay the same as they were for your annual returns and accounts. However, your corporation tax accounting period will restart on the date the business becomes active.
Liquidate the company
A members’ voluntary liquidation is another way to close down a solvent, one-person consultancy business. This process is an excellent tool for taking money out of your business at a much lower rate of tax, helping you make a sizeable profit while walking away from the company. This process could be the best option available to you if:
• The company has plenty of assets, like property, vehicles, stock and/or cash in the bank, but it has no future purpose;
• You would like to retire and no-one else in the family wishes to run the company, so transferring the firm’s assets and cash over to you personally is the best option;
• You want to step down from the business and realise the cash or the assets tied up in the company;
• You want to start a new company and would like to close the current business beforehand.
How does a members’ voluntary liquidation work?
Your first task is to complete and sign the declaration of solvency form 4.70, which must be sent to Companies House within 15 days of the resolution being made. An authorised insolvency practitioner must then be appointed as the liquidator if the distributable assets have a value greater than £25,000. If the assets are worth less than this amount, it is not necessary to formally appoint a liquidator.
If a liquidator is appointed, there will actually be very little left for you to do. While a licensed insolvency practitioner may charge for this service, they will also help you benefit from a substantial tax saving.
Sell the business
Alternatively, you could stand to make a sizeable profit while walking away from your consultancy business by selling the company. As a one-person limited company, you will not be able to sell your company shares on the stock market like a PLC. However, if you do find a buyer to transfer the directorship and shares in the company to, then as you’re the only shareholder, valuing the company should be relatively easy.
How can we help?
If a member’s voluntary liquidation sounds like the most appropriate tool to close your company down, we can help. Please call 08000 746 757, email: email@example.com or use the live support feature on our website for a no-obligation discussion of your circumstances.
Written by: Mike Smith