Setting up a company is a process that can be finished with an online company formation agent, within a matter of hours. Dissolving a company, on the other side, can be a complicated and confusing process without professional guidance.
You need to know various processes and methods to close your limited company, including costs, permissions, timescales and much more.
Do you need to contact HMRC when you want to dissolve your company?
If you decide to close your limited company, you must apply to Companies House for it to remove from the register. Before doing so, you should consider if any outstanding debts are due by or to the company and then close all business bank accounts. You must also inform HMRC that your company has ended trading and is ‘dormant' (inactive) for corporation tax purposes.
Before you dissolve your company, business assets must be transmitted from the company's property to the shareholders. If you do not do this, any assets owned by the business at the dissolution date will pass into the ownership of the Crown.
Following are the requirements you must meet to apply to Companies House to close a company:
- Not have traded on any kind of business within the last 3 months
- Not changed its name within the last 3 months
- Not subject to any proposed or current legal proceedings
- Not made a disposal for value of rights or property
If you can satisfy all of the above-mentioned requirements, Companies house will provide you with Form DS01‘Striking-off application'. This should be completed with the company name and registration number (CRN), and the names and authorizing signatures of a majority of the appointed directors. This form can be filed online or by post to the appropriate Registrar.
Within 7 days of applying for dissolving the company, copies should be given to all notifiable parties, including:
- Pension trustees or managers
- Other company's directors
- Any person who becomes a notifiable party within 7 days of submission of the application is made
If Companies House is satisfied with the application, the information will be shown on the public register. If no objections are raised, it will be closed within around 3 months of the date of the notice.
Requirements for HMRC
Before the starting date of the company dissolving process, your company will have to submit a Company Tax Return and pay any outstanding corporate tax liabilities from the accounting period. After the start of the company dissolving process, any capital gains made on the sale or disposal of business assets will fall into a new accounting period.
After completion of the company dissolving process, a final Company Tax Return and tax payment will be required. Directors may also be responsible for personal gains or losses on the disposal of assets and shares. This should be reported in their for Self Assessment tax returns.
You have to make sure that the payroll is closed. When running the final payroll, a final Full Payment Submission (FPS) should be submitted and you must pay any outstanding PAYE tax and National Insurance deductions within the specified time limits.
If your company is registered for VAT, it should be de-registered. It is essential to file a final VAT return and pay any outstanding VAT liabilities.
Do you need to inform HMRC that your company has been dissolved if it never traded?
If your business has been dormant since the date of incorporation, it should have been registered as' inactive' with HMRC. In such cases, it will not be registered as ‘active' for corporation tax purposes or any other tax liabilities like VAT or PAYE. As long as the company did not receive or spend any money during its lifetime and no capital gains were made from the sale or disposal of any business assets, it is highly unlikely that you will be required to pay any business taxes or file any tax returns.
However, you can contact HMRC to ensure that no obligations arose because of closing your company; otherwise, you may continue to receive statutory mail from HRMC at your registered office address. You will be required to provide with your company's unique taxpayer reference when contacting HMRC.
Dissolving a dormant business
It is much easier to close a limited company when it has never traded. As long as the majority of the directors of a company agree to the closure, it is possible to submit a' Striking Off' application. A director will be required to apply for and complete Form DS01, which should be filed with Companies House.
This form should contain the following details:
- Name of the company
- Company Registration Number
- Names and signatures of all or the majority of the directors of the company
How do you dissolve a limited company?
The closure of a limited company relies on whether it is solvent (i.e. able to pay its bills) or insolvent (i.e. unable to pay its bills). If it is solvent, the easiest way for directors to close it is by applying to Companies House to remove it from the register. Otherwise, you can begin a members' voluntary liquidation.
If your company is insolvent, the directors may suggest a creditors ' voluntary liquidation process.
This step will require at least 75% of the voting shareholders (by the value of their shares) to agree to the closure by passing a winding-up resolution. In some situations, its creditors or HMRC can close a company.
Striking off a solvent company
Applying to Company House to have a solvent company stricken off the registration is as simple as described above. If the requirements of closure have been met (i.e. if all debts have been paid, the company has not traded within the last three months), then all or most of the directors can sign a DS01 form and send it to Company House.
If no objections are raised, strike-off should take place within about three months.
How much time does the dissolution of a company take?
It requires at least 3 months for a company to be formally dissolved, but if the process is complicated, the length of time can differ significantly. However, a business will generally cease to exist no less than three months after the notice of winding-up is published.
Can you re-open a company that had been dissolved before?
Some dissolved limited companies can be restored by applying for a court order or through Administrative Restauration. You may also seek autonomous legal advice if you wish to restore business by court order.
If the company was struck off involuntarily (i.e. by the Registrar, because of failure to file your annual confirmation statement or annual accounts), you can apply to Companies House for a restoration. It is not possible to apply for administrative restoration if the company was voluntarily struck off.
What permissions should I have to dissolve my company?
You must have the approval of a majority of directors to close a solvent company. By signing the striking-off proposal submitted to Companies House, they will show their approval.
To close a company by way of a members' voluntary liquidation or creditors' voluntary liquidation, 75% of the vote of the shareholders must agree to the winding-up of it.
If a third party plans to force closure, approval must be acquired from the court by requesting for a winding-up petition.
Can you object to a company being ended up?
Any interested party, along with shareholders, creditors, employees, directors and customers, may make objections to Companies House. However, the company itself may raise an objection when the claim is false. All objections should be made in writing and should be followed by supporting evidence.