How to Close a Limited Company in the UK

Categories Business Advice, Companies HousePosted on
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Are you looking to close a limited company? This quick and easy guide will answer all your questions about how to close a limited company in the UK — and take you through the essential steps to complete the process.

GOV.UK defines a limited company as “a company limited by shares or limited by guarantee”. If you need to close your limited company because of unfortunate circumstances or because you want to begin a new business venture, you need to do the following:

Complete All Outstanding Financial Legalities

Before you can close your limited company, you must settle any outstanding bills and collect any fees or charges owing. You must also continue to cover operating costs until your business legally closes. These financial caveats may be labelled as allowable business expenses — reducing your final Corporation Tax bill.

Complete a VAT Form

When you’re closing down your limited company, you must inform HMRC if you’re VAT registered. Subsequently, you’ll have to complete a VAT 7 form.

Your “deregistration date” will be given to you once HMRC receives the form. Remember, you must keep your VAT accounts up-to-date until HMRC confirms deregistration. Additionally, you’ll have to complete a last VAT return for any leftover stock or company-owned equipment.

Avoid Corporation Tax Reminders

You have to inform HMRC that your company’s no longer trading to avoid receiving further reminders for Corporation Tax. The way you do this depends on whether HMRC has ever asked your company to file a company tax return.

If you have never received a “notice to deliver a company tax return” you can tell HMRC that you have a dormant company. However, you must still file a tax return online if your company has previously filed a tax return. You can learn more about this through the GOV.UK website.

Terminate Your PAYE Scheme

If your company went through the process of setting up PAYE, HMRC will need to know it’s no longer in operation.

Consider Capital Gains Tax Implications

If you are a freelancer, any equipment you used in the course of your business may be classed as belonging to your limited company. So, you may need to pay Capital Gains Tax on any items in your possession before your company’s termination.

Solvent or Insolvent Limited Companies

When you’re closing a limited company, you must consider the following things:

Do your company’s liabilities outnumber its assets?
Can your company’s debts be paid promptly?

If you answer “yes” to the above, then your company is solvent and you will have to distribute assets to shareholders. If you answer “no” then your company is insolvent as your company can’t pay its liabilities.

Closing a Solvent Limited Company

You have a couple of options for closing a solvent company:

Closure/informal Strike-Off

A company director needs to complete a striking off form to remove a business from the register at Companies House. You’ll have to provide the following details on this form:

  • Company name
  • Company Registration Number (CRN)
  • Names/signatures of all/majority of company directors
  • A cheque for £10 from an account that does not belong to the company you’re striking off.

Companies House will then publish a notice in an official public record in London, Edinburgh, or Belfast, to official notify any parties who may object to the closure. This notice shouldn’t be a concern if you have not traded.

After three months, if there are no objections, Companies House will confirm the closure of your company. Before this happens, you must fairly distribute any outstanding profits to your shareholders. The critical thing to remember is you must transfer the assets of your company before it’s closed down. Once a company is struck off, its associated bank accounts are frozen and the Crown will take the remaining balances.

Closing an Insolvent Limited Company

If your directors and shareholders agree your company is insolvent, you’ll need a Creditors’ Voluntary Liquidation (CVL) to close the company. In this instance, any company assets are allocated to the company’s creditors. 75% of the shareholders need to agree to a CVL.

The time it takes to complete the CVL process varies for each business. Issues such as company size and the complexity of the debts and assets can all contribute to the time it takes. Once completed, the company will be struck off from the Companies House’s register.

However, even if you aren’t trading at the moment, you may wish to trade through your limited company in the future. In this situation, you could make the business “dormant” and put it on “hold” rather than closing it. All you’ll need to do is file nil tax returns to show HMRC you’re not trading. In the meantime, you can work as a sole trader until you are in a better position to revert to your limited company. Doing this will spare you having to go through the process of setting up a company again with a new company name or finding a registered office address provider for your business.

 

To find out more about how to close a limited company, contact Mint Formations today and let our expert team guide you along the way.

 

 

 

 

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Raj co-founded Mint Formations with business partner Andy Tree in 2017. Mint formations is established to nurture small UK businesses and enable exciting new opportunities for quick growth. As a successful entrepreneur, Raj knows how to start and run a business. He currently resides as a board member of seven successful companies across the world. He is best known for founding Integra Global Solutions, specialists in robotics, automation, and business process optimisation.