If you no longer wish to continue your activity, you can choose to close down your limited company by getting it ‘struck off’ the Companies Register. You can do that if:
1) Your company hasn’t traded or sold off any stock in the last 3 months
2) You haven’t changed your company’s name in the last 3 months
3) Your company isn’t threatened with liquidation
4) Your company has no agreements with creditors such as a Company Voluntary Arrangement (CVA)
Another options, if your company doesn’t meet these conditions, is to voluntary liquidate it. You need to take into consideration that applying to strike off your company means complying with certain responsibilities in order to close down your company properly.
- Announce the strike off to interested parties and HM Revenue and Customs (HMRC)
- Make sure you respect all the rules regarding employee treatment
- Deal with your business assets and accounts
Who you must tell
Anyone who could be affected by your decision to strike off should be notified. Fill in an application to strike off and send a copy within 7 days to members (which are usually the shareholders), creditors, employees, managers or trustees of any employee pension fund and to any directors who didn’t sign the application form.
Employees
In case you decide to strike off your company and you have employees, you need to follow the rules if you make staff redundant and make sure you pay their final wages or salaries.
PAYE and National Insurance (NI)
Before applying for strike off you need to announce HMRC that your company will soon be dissolved. When you’ve paid the final balance of PAYE and National Insurance you can ask HMRC to close down your payroll scheme.
Business assets
Share your business assets among the shareholders before company is struck off and make sure you share all the assets because anything left will go to the Crown and the only way to get anything back is to restore the company.
Final accounts
Before your company is struck off you need to prepare and file your final accounts and company tax return specifying that your company will soon be dissolved, and of course, pay all Corporation Tax and any other outstanding tax liabilities. You don’t need to file final account with Companies House, but you need to send final statutory accounts and a Company Tax Return to HMRC.
If your final year of trading has ended with a loss you can offset the tax against previous profits and benefit from what it is known as a ‘terminal loss relief’, claim that can be made on your final tax return.
Capital Gains Tax on personal profits
If you take assets out of the company before it is struck off you will need to pay Capital Gains Tax on the amount. That is if you aren’t able to benefit from Entrepreneurs’ Relief, obtain tax relief and work this out on your personal Self-Assessment tax return.
Still, if we are talking about more than £25,000 you will have to pay income tax on it because it is treated as income.
Keeping records
Even if you no longer have activity on your company, you will have to keep business documents such as bank, statements, receipts and invoices for another 7 years and copies of employers’ liability insurance policy and schedule for another 40 years (if you employed people).
Make sure you dealt with all the assets before applying because after your company is dissolved all the assets including any bank balance will be transferred to the Crown.
What happens next
A letter from Companies House will announce you if you’ve filled in the form correctly, in which case your request will be published in the local Gazette and you will have to wait for 3 months in case anyone objects to your request to strike off the company. After three months, if nobody objects, a second notice will be published in the Gazette meaning that your company no longer exists legally.
Withdraw your application
Withdrawing your application can take place if something changed and your company is no longer eligible to be struck off, case in which you MUST withdraw your application, or if you changed your mind, case in which the company needs to be still on the Companies Register to be able to withdraw your application.
Applying for voluntary strike-off and dissolution
If you own a company or a limited liability partnership (LLP), you want to retire and you have no one to take over your company, your product no longer has a market or any other reason for ceasing your activity, you may submit an application to strike your company or LLP off the Companies House register.
When you can apply for voluntary strike-off
There are certain conditions which you need to comply in order to be able to strike-off your company such as having paid all of your trading or business debts in the previous three months.
You can’t apply to strike-off your company if:
- In the last three months your company has carried on business in any way or form
- In the last three months your company has changed its name.
- In the last three months you traded any property or rights owned by your business that have been the object of previous trading. For example, you can sell cars or technology used to manufacture or transport your merchandise, but not your merchandise.
- Your company has insolvency proceedings such as liquidation that need to be dealt with
- There are standing arrangements between your company and your creditors or members
It is considered an offence and could lead to a fine of £5,000 (if convicted by a magistrate’s court) or an unlimited fine (if convicted by a jury):
- To submit striking-off application in a situation when your business doesn’t comply with all the mandatory requirements;
- To provide false or misleading information;
- To not send a copy of the application to all relevant parties within seven days. If this is done with the proven intent of concealing the application, designated members of LLP or company directors can be fined or imprisoned for up to seven years;
- To not withdraw your striking-off application if your company becomes ineligible after you have submitted your application.
Making a voluntary application for strike-off
For a limited company, the official procedure includes filing the completed DS01 form bearing the date and the signatures of: 1) the sole director, if there is only one; 2) both directors, if there are only two or 3) all, or the majority of directors, if there are more than two, and sending it with the appropriate fee (usually stated on the form), to Companies House in Cardiff, Edinburgh or Belfast.
For a LLP the official procedure includes filing the completed DS01 form bearing the date and the signatures of: 1) the remaining member if there is only one; 2) both members if there are only two or 3) the majority of members, if they are more than two.
What Companies House does
Your form will be reviewed by the Companies House and if it is acceptable it will register the information on the public record for your company or LLP. You will also receive an acknowledgment to the address you indicated on the form and on the registered office address.
Your proposed striking-off will be published by the registrar in the relevant Gazette (official newspaper of record in the UK) giving interested parties the opportunity to object. If there is no objection or other reason to delay, your business will be struck off from the register (but not sooner than three months after the date of the notice). Your company or LLP will be considered dissolved on the publication of a further notice announcing it in the Gazette.