Closing a company in England

There is a lot of information on how and why one can form a company in England, but only a little on how to close it when for various reasons you no longer need it and the cost of the process. In this article, we will briefly describe the essential steps in order to close a company in England.

Chapters

1. Assessing the closure of the company

2. Company closure and Capital Withdrawals Methods

3. Who needs to be notified

4. Removal from registries (Companies House, VAT and payroll)

5. Closing the back account

6. Finalising the company closure

1. Assessing the closure of the company

Try to assess carefully whether you really need to close the company or keep it as inactive. Approach the issue from a financial perspective as you will need to deal with expenses even for an inactive (dormant) company, such as submitting the annual Final Accounts, which, if done by an accountant, will have a substantial cost.

You may need to keep your company as inactive (dormant) if for example you have found a short-term employment elsewhere following promising financial yields for a short period.

2. Company closure and capital withdrawals methods

Supposing you have concluded to close the company, you now have to decide how to do it. There are two main methods:

I. Striking off

There are certain conditions before this method can be applied:

1. The company has not had any commercial activity for the last three months

2. The company has not changed its name in the last three months

3. The company has not been threatened with liquidation, for example, due to debts.

4. The company has no pending agreements with its creditors

5. The company has no other activity than that necessary for legal and closing purposes.

The relevant process is applied as set on The Companies Act 2006.

II. Member’s voluntary liquidation

This route is recommended if the company’s capitals are over £25 - £30,000 which have to somehow be attributed to the shareholders. In this case, you can secure some cash due to low tax (10%) since it will be subject to CGT (Capital Gains Tax) and not to salaries or dividends (in which case and based on the tax scale of the last option, the shareholder may need to pay up to 32.5%).

This method may be compulsory if the company has outstanding debts.

The method is also recommended if the company has tangible property assets, such as vehicles, as they can be attributed in kind (as an alternative to cash). This can be done directly and no matter which method is used to distribute the assets.

You do not need to keep documents of the company for 6 years but only for 12 months and the relevant process applies as set in The Insolvency Act 1986.

Please note that the process will have to be assigned to an authorised - licensed specialist and not an accountant and therefore, the cost can be substantially higher.

3. Who needs to be notified

• ➤ Companies House

• ➤ Other experts supporting the company (Bank, Insurer, Accountant etc.)

• ➤ Company’s suppliers

• ➤ Company’s clients, if they affected by the closing of the company

4. Removal from registries

All departments of HMRC must be notified separately (VAT, Payroll and corporate tax departments). You should not assume that when a company closes all services are automatically notified.

You may notify the involved departments while you submit your last forms (VAT declaration form of the last salary and company’s return form).

5. Closing the bank account

After you have decided on the method of capital withdrawals and distribution, sorted out any outstanding payments and withdrawn the available money form the bank, you can close the company’s bank account.

Attention! The capitals and company assets which are not distributed, will be subject to “Bona Vacantia”, meaning that assets technically not owned by anyone will now belong to the Crown.

6. Finalising of company closure

After all the above steps, you can notify The Companies House by submitting the DS01 form.

Companies House will then publish the decision in the London Gazette and if there are no objections (for example by a creditor) the company is permanently closed and dissolved 9 months later.

Translated / Edited by, Apostolia Nestoratou.

© 2020 UPECO LTD

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ATTENTION!

This article intends to give only a general informative picture and should not, in any case, be taken as a rule. It is strongly recommended to seek a full and professional guidance specifically for your circumstances before making any decisions.