How to Officially Close a Limited Company
Closing your company isn’t as simple as handing your keys over and closing the door. You need to make sure your limited company is officially shut down before walking away. In this article, we’ll cover the basics behind closing your limited company.
This article covers:
- What loose ends do you need to tie up?
- Corporation tax
- Company status
- How do you close a solvent company?
- How do you close an insolvent company?
- Can you ever get a limited company back?
- Who can help you close a limited company?
What loose ends do you need to tie up?
The first thing you need to do is ensure your VAT, Corporation Tax and PAYE responsibilities are all taken care of.
One of the first things you will need to do when shutting a company down is to tell HMRC you’re no longer trading. This ensures you don’t get further reminders to file for Corporation Tax.
If you have never received one of HMRC’s ‘notice to deliver a company tax return’, then you will need to tell HMRC the company is dormant either by phone or post. If you have already filed tax returns before, you will still need to file a tax return to show to HMRC that your company is dormant.
For those who are VAT-registered, you need to tell HMRC you want to de-register for VAT with a VAT 7 Form. Up until HMRC confirms this, you will still need to file for VAT and complete a final VAT return to tie everything up.
If you have a PAYE scheme, HMRC needs to know that this is no longer in operation as well.
The process for closing your company down will depend on whether you are solvent or insolvent. If you have more assets than liabilities and can pay debts on time, your business is solvent. If not, then your company is insolvent.
How do you close a solvent company?
To close a solvent company, you can either strike-off your company from Companies House or do a Members Voluntary Liquidation. Striking-off your company must be done by a company director completing a striking-off DS01 form.
Voluntary liquidation allows you to unlock cash so that profits are fairly distributed to shareholders as capital rather than dividends. This is typically a more tax-efficient method.
How do you close an insolvent company?
When the company is insolvent, you can do a Creditors’ Voluntary Liquidation. This means the assets are allocated to the parties the business owes to pay all your debts
Can you ever get a limited company back?
If you want the option to trade again one day, you can put your business on hold by making it dormant. You will still need to file tax returns to show you’re not trading but you can easily restore your company again in the future.
Who can help you close a limited company?
Closing a limited company involves tying up a lot of loose ends. You may still need to file tax returns and other paperwork even after you’ve walked away. For peace of mind, getting an accountant to help you through the process is your best bet to ensure it’s all done efficiently and correctly.
If you ever want help in the future with company restoration, this is a service we provide to get businesses back up and running again. For more information, visit our company restoration page or get in touch on 01925 670 289. If you are looking to sell your business and need help planning your exit, learn more about our Exit Planning services here.