How to close a limited company

Liquidation can be categorised into two types: Voluntary and Compulsory.

A guide to closing a limited company

For a dormant company, opt for a cost-effective strike-off using Companies House's DS01 form, costing £10, if there are no debts. Closing a ltd company with VAT debt or other complexities may demand a Members' Voluntary Liquidation (MVL) or Creditors' Voluntary Liquidation (CVL) with fees ranging from £1,500 to £6,000, depending on the process's intricacy. Closing a limited company, whether due to VAT debt, being dormant, or with HMRC involvement, requires careful consideration and the right approach.

Responsibilities when closing a limited company

While limited company formation may seem relatively straightforward, striking it off becomes a more intricate process when you take into account all the additional steps involved.

Deregistering for VAT

To close your limited company with VAT debt to HMRC, follow these essential steps. Complete and submit VAT form 7 to HMRC when you cease trading to deregister your company from VAT inclusion. Wait for HMRC to confirm receipt and provide a deregistration date before halting VAT accounting. Additionally, remember to submit a final VAT return, accounting for any remaining stock or business equipment.

Corporation Tax

To halt Corporation Tax reminders, notify HMRC of your company's discontinued trading and file a tax return online to declare it dormant. Even if HMRC hasn't requested a tax return previously, inform them via phone or post about the company's dormant status. By taking these steps, you can avoid unnecessary reminders and ensure a smooth process in closing a dormant company.

PAYE scheme

When a PAYE scheme becomes non-operational, it must be closed promptly when closing a company in the UK, including a LTD company. Contact HMRC and submit a final payroll return to initiate the closure process. HMRC provides detailed instructions on how to complete this procedure efficiently.

Capital Gains Responsibilities

If you have the question on how to close a company in the UK, including closing a LTD company, handle equipment purchased using company funds. Decide to sell the equipment or transfer ownership to yourself. Account for any capital gain and include it in your self-assessment tax return .

Is your company solvent or insolvent?

Closing a limited company with VAT debt or any other financial situation calls for a careful consideration of its solvency status. A solvent company operates smoothly, meeting all obligations without issues. In contrast, an insolvent company faces challenges like unpaid debts and creditor pressure.

Whether you're closing a dormant company, a limited company with VAT debt, or any other scenario, comprehending your company's solvency is crucial.

How to close your company if it’s insolvent?

In cases where all shareholders and directors unanimously agree on the limited company's financial constraints, leading to an inability to clear debts, the optimal course of action is to commence the process of closing the company through Creditors Voluntary Liquidation (CVL). This approach becomes essential, especially when facing challenges such as closing a limited company with VAT debt or closing a dormant company.

During CVL, company assets are utilised to settle creditor claims, subject to the agreement of 75% of shareholders. A licensed Insolvency Practitioner plays a pivotal role in guiding this procedure, ensuring a seamless and well-organised closure. The timeframe for CVL hinges on the complexity of liabilities, available assets, and the company's size. By adhering to HMRC requirements and seeking professional advice, you can embark on a successful company closure journey, making way for new opportunities and a fresh start.

Make your limited company dormant

If you decide to strike your business off from the official register, it will no longer be active, making it impossible to trade under that name again. However, you have the option to put the company on hold and make it dormant if you plan to resume trading under the same name in the future.

A dormant company doesn't require informing HMRC about an intention to close, but you'll still need to file certain tax returns with zero activity to indicate that you're not actively trading. Before making the company dormant, ensure you've paid your Corporation Tax in full. Additionally, submit your annual confirmation statement, dormancy statements, and annual accounts to HMRC.

Do I need an accountant for a dormant company?

Yes, when closing a limited company with VAT debt, handling its annual accounting statements becomes crucial. Employing a professional accountant can aid in preserving the dormant status, which is vital for closing a dormant company. Moreover, the accountant's guidance can be invaluable in understanding how to close a limited company without paying too much tax or dealing with VAT debt, while ensuring compliance with HMRC regulations.

Can I Close a Company and Start a New One?

When closing a company, directors must consider its financial status and liabilities. If the company is dormant or no longer trading, dissolution might be chosen. For cases with excessive debts, liquidation is an option to settle with creditors. If the business is no longer viable or has achieved its goals, dissolution may be suitable. Companies with no trading history can easily apply for striking off if there are no liabilities. However, those with liabilities despite no trading history can use striking off or liquidation for closure.

Can HMRC pursue a dissolved company?

Yes, if you are closing a limited company with debts to HMRC and other creditors, it can be pursued, and it may receive an objection to its strike off before its full dissolution. In cases where a company has debts and is already dissolved, HMRC might apply to get the company back into the register so they can pursue the tax arrears owed. So, closing a limited company with debts to HMRC cannot be avoided by simply getting the business off the official register.

Why would a company be dissolved?

Company directors can decide to dissolve a company if:

• The business is no longer trading or is dormant.
• There are excessive debts, and they want to liquidate to pay off the creditors.
• The business is no longer viable, and the directors want to legally close it.
• If the specific goal of opening the business has been met, then it can dissolve.

Closing a Limited company that has never traded?

Companies that were opened but were never involved in any trade can simply apply for striking off because they do not have current liabilities. If you decide to close a limited company that has never traded, there are different options available depending on its specific situation. In cases where the liabilities exist but the business has never traded, an application for striking off or liquidation can be used as a way of closing it.

How to close a limited company with companies house?

If the process of closing a limited company is by applying for a striking-off and Companies House has received the DS01 form, it will update its records and advertise a notice of the proposal. When no objections are made, the company will be dissolved within two months of the application.

However, if the closure procedure is insolvent or solvent liquidation, the Companies House will wait until they get a filing of the final account by an official liquidator before the process starts.