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Closing Down a Limited Company With or Without Debts

What options are available to close a limited company?

When closing a limited company, there are various options you can take, depending on your company’s financial state. Firstly, you need to ensure you have capital as when you shut your limited company, after trading debts will need paying. These include:

  • Final corporation tax and VAT payments
  • Final accounting fees
  • Bank loans and overdrafts
  • Any money shareholders or directors are owed
  • Any remaining accounts owed to trade suppliers
  • Any outstanding payments of PAYE and National Insurance on payroll
  • Any ongoing commitments, including hire purchase or lease agreements

If your limited company owes money to creditors, the following options are available to you:

  1. Creditors Voluntary Liquidation (CVL). The creditors have the authority to appoint the liquidators who will assist the company in selling its assets and using the received cash to fund the debts. This is liquidation. CVL meetings will occur. A CVL is the best option if there is a large amount of debt, as the director’s duty will be to maximise the creditors best interests. More information on CVLs and creditors meetings, can be found here.  Additionally, if you would like to liquidate your company, call us on 0800 9700539. We can talk you through the process, organise the legal paperwork and begin proceedings. For more advice, support on enquiries, contact us today.
  2. If you cannot afford an insolvency practitioner but wish to close down your company, you have options. See more details here.

If your limited company has NO debts which need paying to creditors, then these options are available for you:

  1. Members Voluntary Liquidation (MVL). This is a formal process used to close a solvent company. Licensed insolvency practitioners are called in to aid the company in turning assets into cash. The money received from this is then equally distributed to the company shareholders. Directors may be able to claim entrepreneur’s relief if there is £25k or more taxed on shareholders using capital gains tax rather than dividends. To do this, directors must declare that the company is able to pay everything, including cost of liquidation, in full.  To help with the formal process, call our experienced licensed insolvency practitioners on 0800 9700 539.

  2.  Dissolution, also known as striking off. Below are the simple steps you should take:
  • Take no more transactions and continue to cease trading. The only transactions that should be applicable at this date, should be those required for the winding up procedure.
  • Payments should be completed for everyone the company owes money too. Until all debts are paid, the business bank account should not be emptied or closed. Any loans to or from any stakeholders of the company need to be repaid. Any hire purchase or lease agreements need to end early, so the finance companies should be contacted.
  • A final pay roll is to be issued for all the staff. P45 will be issued. A final return of payroll information will need documenting to HMRC.
  • The company must apply to HMRC for its VAT registration to be cancelled. The form, ‘VAT 7’, is used. A final VAT return will need completing. 
  • Directors of the company now have the opportunity to resign. However, at minimum, one director should remain to follow through with the closure. 
  • A final set of accounts will need to be submitted to HMRC. Usually, these are prepared a few weeks or months from when the firm ceased trading, as in the following months their may still be some final expenses needing sorting.  HMRC will also need to be informed that the company has ceased trading and has no more taxable income.
  • The last payment is underway. This is the payment of corporation tax, paid from the company’s bank account. From closing the business, the company has 9 months to pay this – the company cannot be shut down until the payment is finalised.
  • All assets remaining, should be proportionally paid out to the shareholders, based on their shares.
  • Following an inactive 3 months of business and payment of all debts, directors can fill in a striking off application and send this to companies’ house (enclosed with a £10 cheque).
  • Keep checking the companies house list to see your company’s status. Once the status says ‘dissolved’, the application has been accepted and companies house have closed your business.
  • An alternative should be outlined here. It costs less than £100 for the business to stay dormant. This means the company is able to be used again with no delay or set up cost. The company name will remain as will the financial credit status. This should only be done when the company may be used again in 3 years, if not it will work out more cost effective to just dissolve.
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