When a business owner wants to close their company, it’s easy to assume that they are having cashflow problems, such as large debts or other financial troubles.
However, there are plenty of business owners who want to close their company when it has no debts – i.e. is ‘solvent’.
There are many reasons for wanting to close a solvent company. These typically include:
- moving abroad
- returning to full-time employment
- closing a company due to IR35 changes
- re-organising a group of companies.
Whatever the reason, there are a few different ways to close your company.
Striking off a company
You can apply to get the company struck off the Register of Companies. Your company must meet certain criteria in order to do this. It:
- must not have traded or sold off any stock in the last 3 months
- must not have changed names in the last 3 months
- is not threatened with liquidation
- has no on-going agreements with creditors e.g. a Company Voluntary Arrangement (CVA)
To apply to have your company struck off you also must take certain steps.
- You must inform anyone who would be affected by it. These include members (usually the shareholders), creditors, employees, managers or trustees of any employee pension fund and any other directors within the business.
- Employees must be paid their final wage and proper redundancy steps must be followed.
- HMRC must be informed and be sent final statutory accounts and a Company Tax Return.
- You must distribute any assets with the shareholders.
Rather than closing your company, you can let it go dormant for tax purposes. Your company must not be carrying on business activity, trading or receiving income. Whilst your company is dormant it will still be registered at Companies House and you can leave your company dormant as long as you like.
Members’ Voluntary Liquidation (MVL)
You can close your company with a Members’ Voluntary Liquidation (MVL).
This is often the most tax-efficient way to close a solvent company. Your accountant will calculate whether or not a MVL is the right course to take and will be able to see if you qualify for Entrepreneur’s Relief (ER). Through an MVL, the funds that are distributed will be subject to Capital Gains Tax rather than Income Tax. And if you qualify for ER, you can benefit from a 10% marginal rate on distributions. This means as the director, you will see considerable tax savings.
If you wish to close your company through a Members’ Voluntary Liquidation (MVL) you will need to use a Licensed Insolvency Practitioner – such as Clarke Bell.
We have a wealth of experience in MVLs, having dealt with over 1,100 MVLs and distributed more than £155 million to the relevant shareholders.
Our standard fee is £995 +VAT +disbursements.
The whole process is quick and easy. We aim to distribute the assets of the company after 35 days from the date of liquidation. And our MVL service covers the whole country, as we do not need a face-to-face meeting.