A Personal Service Company (PSC) is a limited company normally with one director, a contractor, who owns most or all of the shares of the company.
As the director of a PSC, you will get to the point when you will no longer need your company – generally due to retirement or taking up a PAYE-role (especially prevalent with the new IR35 rules).
So, when the time comes, how do you decide the best way to close down your PSC?
The first consideration is whether your company is solvent (i.e. it can pay all of its debts) or insolvent (i.e. it can’t pay all of its debts).
A solvent company
Most of the PSCs we speak to are solvent. If your PSC is solvent and ready to be closed down, there are a number of options available to you…
Applying for a Voluntary Strike Off
You can apply for a voluntary company strike off at Companies House. To begin this process, you must apply to Companies House using a DS01 form. As the sole director of your company, you will have to sign the form and, as applicable, any other shareholders, creditors, traders, insurance companies and banks will need to be informed. You’ll also need to ensure that your PSC has no outstanding debts, for example anything that’s owed to HMRC, such as Corporation Tax and VAT.
You must forward all paperwork to HMRC, including a final set of accounts, from the date of your PSC’s last set of accounts to the final trading day, as well as inform HMRC to cancel any VAT registration. Also, a final company tax return, which encompasses the period from the last tax return to the final day of trading, must be submitted.
If your PSC has traded or changed names over the last 3 months, and/or has creditor agreements in place, then a strike off request could be declined.
Closing with a Members’ Voluntary Liquidation
A Members’ Voluntary Liquidation (MVL) is a way of closing down a solvent company. It is typically used when the company has assets (e.g. cash in the company bank account) of over £25,000; and it is popular because of the considerable tax savings that are available to the directors / shareholders of the company.
MVLs are HMRC-approved; and, each year, about 10,000 companies in the UK go through the MVL process.
An MVL is used to wind up a solvent company in a controlled way, and any funds distributed are subject to Capital Gains Tax, rather than Income Tax. This enables shareholders to realise their assets in a very tax-efficient way.
You may also qualify for Entrepreneur’s Relief (ER), which means you can benefit from a 10% marginal rate on distributions.
This can all add up to considerable tax savings for you.
Help with your MVL
Clarke Bell have put more than 2,000 companies through the MVL process and securely distributed more than £329 million of assets.
This means that we can give you the expert help you need, whenever you are ready to close down your PSC.
Our fees are very affordable (from £995 +VAT, +disbursements); and we make the distributions to shareholders after 35 days from the date of the liquidation.
An insolvent company
If your PSC has debts that it cannot pay (typically taxes due to HMRC), then you will need to close it down with a different process – typically a Creditors’ Voluntary Liquidation (CVL).
The CVL process is different from the MVL process, but we can also help you to deal with your company debts through the CVL process.
For more information
If you’d like any more information about the best way to close your PSC, contact us on 0161 907 4044 or [email protected]