Formal process for winding up a company?

[youngsyr]

Can anyone advise what the formal process is for winding up a limited company?

I have the final set of accounts and tax return ready to file, which I normally do in the HMRC online portal. Is there a box to tick somewhere to say that the company is being wound up and these are the final accounts?

Thanks!

[trickywoo]

https://www.gov.uk/strike-off-your-company-from-co...

[youngsyr]

trickywoo said:

https://www.gov.uk/strike-off-your-company-from-co...

Thanks, it's this bit that I'm stuck with:

"File your accounts and company tax return, stating that these are the final trading accounts and that the company will soon be struck off."

How/where do you "state" that these are the final accounts?

[trickywoo]

youngsyr said:

Thanks, it's this bit that I'm stuck with:

"File your accounts and company tax return, stating that these are the final trading accounts and that the company will soon be struck off."

How/where do you "state" that these are the final accounts?

Is there a comments box like you get with a self assessment? Failing that attach a letter to that effect with the submission.

[Panamax]

Your decision on how to get rid of the company will depend to some extent upon what the company has been doing.

The "proper" way to exit a limited company is through a formal winding-up process. This is done through a licensed practitioner. Then, once the company's gone, it's gone.

If a company has simply been "struck off" then any creditor who pops up can apply to have the company reinstated. For instance, if the company sold defective goods which injure someone after the company has been struck off that person could have the company reinstated to pursue their claim. Even if the company had liability insurance while it was trading that insurance may now have lapsed, leaving the directors uninsured and facing a whole can of worms.

[trickywoo]

Panamax said:

Your decision on how to get rid of the company will depend to some extent upon what the company has been doing.

The "proper" way to exit a limited company is through a formal winding-up process. This is done through a licensed practitioner. Then, once the company's gone, it's gone.

If a company has simply been "struck off" then any creditor who pops up can apply to have the company reinstated. For instance, if the company sold defective goods which injure someone after the company has been struck off that person could have the company reinstated to pursue their claim. Even if the company had liability insurance while it was trading that insurance may now have lapsed, leaving the directors uninsured and facing a whole can of worms.

Winding up will not automatically absolve directors of the type of wrongdoing you reference as a disadvantage of strike off.

The strike off resurrection is available to creditors but if you don't have any its not an issue. Its mainly there to make sure HMRC gets the best shot at getting what they think they are owed.

[youngsyr]

Thanks for the advice guys, but all I'm really looking for is an answer to the question: how do I advise HMRC that the accounts/tax return I'm filing are the final ones?

[OutInTheShed]

youngsyr said:

Thanks for the advice guys, but all I'm really looking for is an answer to the question: how do I advise HMRC that the accounts/tax return I'm filing are the final ones?

I just put a note in the accounts that the company would shortly be dissolved, it had ceased trading and the capital was zero.

I then went through the striking off process with Co's House.

A few years ago now.

[DaveA8]

You’ve had some good advice here, the moment HMRC see your notes on the accounts and the do, that will lead to a letter being fired off to you, a red rag to a bull.
That may not be an issue but it will be time consuming because they are devoid of common sense.

[MaxFromage]

youngsyr said:

Thanks, it's this bit that I'm stuck with:

"File your accounts and company tax return, stating that these are the final trading accounts and that the company will soon be struck off."

How/where do you "state" that these are the final accounts?

I'm afraid I can't help directly as we submit accounts/tax returns for clients using third party software, but the accounts need to state that trading has ceased and the same for the tax return. Are there any tick boxes or dates where you can put when trading ceased? There will be, it's just finding where.

If you really can't sort it, you can write to HMRC Corporation Tax and advise you have ceased trading. How long it will take to update their records is anyone's guess and they won't tell you. Then you can apply to strike the company off. Or you could not bother with the letter to HMRC and hope they don't object to the strike-off.

[MaxFromage]

DaveA8 said:

You’ve had some good advice here, the moment HMRC see your notes on the accounts and the do, that will lead to a letter being fired off to you, a red rag to a bull.
That may not be an issue but it will be time consuming because they are devoid of common sense.

They won't do anything. As long as the tax has been paid, they don't care.

[MaxFromage]

Panamax said:

The "proper" way to exit a limited company is through a formal winding-up process. This is done through a licensed practitioner. Then, once the company's gone, it's gone.

If a company has simply been "struck off" then any creditor who pops up can apply to have the company reinstated. For instance, if the company sold defective goods which injure someone after the company has been struck off that person could have the company reinstated to pursue their claim. Even if the company had liability insurance while it was trading that insurance may now have lapsed, leaving the directors uninsured and facing a whole can of worms.

Suggesting an Insolvency Practitioner is needed for all limited companies to ensure it's done "properly" is misleading. Many companies have no need due to zero possibility of any comeback on them from any third parties. Then you simply need to decide what to do based on taxation.

Secondly 'beyond the grave' claims happen quite often. Currently there's a lot of dodgy firms getting old employees to put in hearing claims etc. There's no need to apply to have the company reinstated if a valid policy was in place at the time of the deemed insurable event, as the claimant can make a claim against that. But of course it's hard to find out any information if there is no one to answer the questions. It's very unlikely that reinstatement would happen because there would be no purpose in most instances. And you can only go after directors in very limited circumstances. Again highly unlikely to go anywhere in 99.9% of case.

[Panamax]

Liquidation maintains the corporate veil so long as directors have acted responsibly. Striking off doesn't. Since the whole point of having a company in the first place is to achieve protection from the "veil of incorporation" (i.e. the separate legal personality of the company) it's clear that "striking off", whilst cheap and cheerful, is not necessarily the right answer. As mentioned in the first sentence of my previous post it all depends on what the company was doing.

[Eric Mc]

OutInTheShed said:

I just put a note in the accounts that the company would shortly be dissolved, it had ceased trading and the capital was zero.

I then went through the striking off process with Co's House.

A few years ago now.

HMRC are not all that interested in whether the company is wound up or struck off. What they really want to know is whether the company has ceased trading and is unlikely to generate taxable profits in the future.

Here's a link to HMRC guidance on what to do.

https://www.gov.uk/tell-hmrc-your-company-is-dorma...

[MaxFromage]

Panamax said:

Liquidation maintains the corporate veil so long as directors have acted responsibly. Striking off doesn't.

You may be confused on this. Maintaining the corporate veil only applies to debts that were outstanding at liquidation rather than in relation to the company trading in general, and so, on this point, a formal winding up is only advantageous if the company is insolvent or cannot manage debts.

In your example above (faulty product), there is no difference between a formal or informal liquidation. The 'corporate veil' is maintained either way.

And of course, if new information comes to light regarding the closure of the company after liquidation, all bets are off.

[trickywoo]

MaxFromage said:

Panamax said:

Liquidation maintains the corporate veil so long as directors have acted responsibly. Striking off doesn't.

You may be confused on this. Maintaining the corporate veil only applies to debts that were outstanding at liquidation rather than in relation to the company trading in general, and so, on this point, a formal winding up is only advantageous if the company is insolvent or cannot manage debts.

In your example above (faulty product), there is no difference between a formal or informal liquidation. The 'corporate veil' is maintained either way.

And of course, if new information comes to light regarding the closure of the company after liquidation, all bets are off.

I tried correcting him on that earlier which was ignored. Reading between the lines I think at some point he has been upsold a liquidation hence the misunderstanding now.

[Panamax]

Please read what I wrote.

"It will depend to some extent on what the company has been doing".

[OutInTheShed]

Eric Mc said:

HMRC are not all that interested in whether the company is wound up or struck off. What they really want to know is whether the company has ceased trading and is unlikely to generate taxable profits in the future.

Here's a link to HMRC guidance on what to do.

https://www.gov.uk/tell-hmrc-your-company-is-dorma...

Dormant is for a company you wish to keep on the register, but don't want to trade and don't want to submit accounts for.

I have dissolved three companies which I no longer needed and I wished to remove from the register and basically draw a line under.
Dissolving a company = settling any liabilities, distributing any remaining assets to the share holders and dismantling the corporate structure
Striking Off = removing a former company from the register at Companies House.

The above are simple things you can do yourself for a simple company.
Once the Company is 'struck off' HMRC stop asking it for tax returns etc.

Although they call it 'struck off' the company is still on the Co House website as 'Dissolved'.

Liquidation, Winding Up.... = more complicated things entirely when the company has outstanding debts it can't or won't pay. These are things I would ask somebody more knowledgeable about.

It is a handful of years since I did all this so some of the detail may have changed. In the last few years I had my last company, it was clear HMRC and CH were working more closely together.

Before you can dissolve a company, you need to settle the debts, get the money out, shut your PAYE and VAT accounts and generally have stopped trading.

[MaxFromage]

trickywoo said:

I tried correcting him on that earlier which was ignored. Reading between the lines I think at some point he has been upsold a liquidation hence the misunderstanding now.

Yes, I appreciate he was only trying to help, but it's frustrating when people double down and end up leaving a trail of misinformation.