If your company is solvent (i.e. it can pay all of its bills) and you have decided to stop trading and close it down, you have two choices:
- Strike off your company from the Companies House Register
- Wind up your company with a Members’ Voluntary Liquidation (MVL).
But which is the better option?
Voluntary Strike Off
The process of striking off your company from the Companies House Register can be used if your solvent company has fulfilled the purpose it was initially set up for. However, you can only use this option to close down your company if it:
- hasn’t traded or sold stock for the last 3 months.
- hasn’t changed names in the last 3 months.
- hasn’t been threatened by liquidation.
- has no agreements in place with creditors, such as a Company Voluntary Arrangement (CVA).
Assets and share capital need to be distributed to your company’s creditors and shareholders, before beginning this process. The maximum value of assets and share capital that can be distributed is £25,000 as funds over this amount are subject to income tax.
If the value of the assets of the company is over £25,000 or you’re a higher rate taxpayer, a better option is likely to be the MVL process.
Members’ Voluntary Liquidation
An MVL is a formal process that can be used to close down your solvent company in the most tax efficient way.
Whether you’re looking to retire, free up assets to fund a new venture or take up a PAYE role due to the IR35 reforms, an MVL is a very tax-efficient and HMRC-approved way to close down a solvent company.
It is more expensive than a Voluntary Strike Off, due to the fact that you must appoint a liquidator (also known as an Insolvency Practitioner). However, the tax savings that are available make an MVL a very attractive option for thousands of company directors every year.
Through an MVL, any funds to be distributed are subject to capital gains tax, rather than income tax, which could result in you saving thousands of pounds. Plus, if you qualify for Entrepreneurs’ Relief (ER), you can benefit from a 10% marginal rate on distributions.
At Clarke Bell, we offer independent, confidential and no-obligation advice for anyone looking to close down their business, ensuring you find the best route to take. You should also discuss your situation with your Accountant, as they will be able to advise you on how an MVL will affect your tax position.
If an MVL sounds like the right option for you, we can help you.
We aim to distribute 100% of the company’s assets after 35 days from the date of liquidation. The standard cost for an MVL is £995 +VAT + disbursements.
If your company isn’t solvent
If your company is insolvent, i.e. it can no longer pay its bills, you won’t have the option of striking it off or putting it through the MVL process.
If you have it struck off before all creditors have been paid, then you could be held personally accountable for debts and be barred from being a director for up to 15 years.
Clarke Bell can advise you on the best option for dealing with an insolvent company.
A popular option is for the company to go through the Creditors’ Voluntary Liquidation (CVL) process. This will allow you to liquidate your company while acknowledging all your legal responsibilities.
If a CVL isn’t the best option for you, we will tell you what is.
For more information, and free & confidential advice, contact us on 0161 907 4044 or [email protected]