winding up a solvent company
Discussion
Hello,
A business I am involved with wishes to close down. All debts are paid and there is some money left in the bank (less than the CGT allowance per shareholder if that makes a difference)
I have received advice from my accountant that does not match the advice on the HMRC web site. The HMRC site suggests we will need an insolvency practitioner to manage the liquidation, my accountant suggests that it is just a case of giving notice of liquidation to companies house (after closing the bank account.)
The accountants way sounds better to me because it only costs £75 but I am concerned that this may result in a tax bill.
Any thoughts?
Ben
A business I am involved with wishes to close down. All debts are paid and there is some money left in the bank (less than the CGT allowance per shareholder if that makes a difference)
I have received advice from my accountant that does not match the advice on the HMRC web site. The HMRC site suggests we will need an insolvency practitioner to manage the liquidation, my accountant suggests that it is just a case of giving notice of liquidation to companies house (after closing the bank account.)
The accountants way sounds better to me because it only costs £75 but I am concerned that this may result in a tax bill.
Any thoughts?
Ben
If you are not holding any debts, then you are not insolvent, so why would you need to use an insolvency practitioner?
I closed down three limited companies last week (admittedly all shelf / dormant companies), there was one form on companies house and the process started (takes about 2 months).
If you are trading then it is a bit more complicated, if you need to share out assets etc. it is a bit more complicated, but ultimately if you have not traded / changed name / etc. for (I think) 3 months, then you can pay £8 and close down a company - any assets not first distributed become the governments - so share them out first!
Presume that there are no objections from shareholders, or any other interested party (list of relevant parties on gov.uk website)?
You will probably need to file a final set of accounts, but they will no doubt tell you if any tax is owed - if so, keep back that in resources and pay the tax bill...
but don't over complicate it
I closed down three limited companies last week (admittedly all shelf / dormant companies), there was one form on companies house and the process started (takes about 2 months).
If you are trading then it is a bit more complicated, if you need to share out assets etc. it is a bit more complicated, but ultimately if you have not traded / changed name / etc. for (I think) 3 months, then you can pay £8 and close down a company - any assets not first distributed become the governments - so share them out first!
Presume that there are no objections from shareholders, or any other interested party (list of relevant parties on gov.uk website)?
You will probably need to file a final set of accounts, but they will no doubt tell you if any tax is owed - if so, keep back that in resources and pay the tax bill...
but don't over complicate it
The relevant question is how much value is left in the company; the next one is how did that value originate - trading or investment.
If it has retained assets from profitable trading then you need to find a tax efficient way of distributing those. If the value is low then that can probably be completed via a year of dividends/salary or combination. If you're talking hundreds of thousand that's much harder and where an MVL comes in - the MVL can be a tax efficient way of distributing built up value in a trading company that was now dormant.
But if there's very little left in there a straight dissolution may be the way to go
If it has retained assets from profitable trading then you need to find a tax efficient way of distributing those. If the value is low then that can probably be completed via a year of dividends/salary or combination. If you're talking hundreds of thousand that's much harder and where an MVL comes in - the MVL can be a tax efficient way of distributing built up value in a trading company that was now dormant.
But if there's very little left in there a straight dissolution may be the way to go
sleepezy said:
The relevant question is how much value is left in the company; the next one is how did that value originate - trading or investment.
If it has retained assets from profitable trading then you need to find a tax efficient way of distributing those. If the value is low then that can probably be completed via a year of dividends/salary or combination. If you're talking hundreds of thousand that's much harder and where an MVL comes in - the MVL can be a tax efficient way of distributing built up value in a trading company that was now dormant.
But if there's very little left in there a straight dissolution may be the way to go
It is less than the CGT allowance for each shareholder (about £24k total) dividends / salary has been taken to get down to this figure. Value is all from trading.If it has retained assets from profitable trading then you need to find a tax efficient way of distributing those. If the value is low then that can probably be completed via a year of dividends/salary or combination. If you're talking hundreds of thousand that's much harder and where an MVL comes in - the MVL can be a tax efficient way of distributing built up value in a trading company that was now dormant.
But if there's very little left in there a straight dissolution may be the way to go
I'm also involved in a business in a similar position, and we've been looking into this as well.
The different options depend on whether you are still trading, or dormant. If still trading, then a members voluntary liquidation does require an insolvency practitioner - we were quoted a minimum of around £5k for this, of everything is simple and everyone cooperates.
If you cease trading and the company is dormant for 3 months, then you can just distribute any remaining assets, do a final set of accounts and strike the company off, allowing for corporation tax etc.
Can't help with the personal tax side of things though, sorry...
The different options depend on whether you are still trading, or dormant. If still trading, then a members voluntary liquidation does require an insolvency practitioner - we were quoted a minimum of around £5k for this, of everything is simple and everyone cooperates.
If you cease trading and the company is dormant for 3 months, then you can just distribute any remaining assets, do a final set of accounts and strike the company off, allowing for corporation tax etc.
Can't help with the personal tax side of things though, sorry...
BigBen said:
It is less than the CGT allowance for each shareholder (about £24k total) dividends / salary has been taken to get down to this figure. Value is all from trading.
In that case, and assuming you have no concerns about a future potential claim against the company (sold anything with a guarantee?) then to be honest I'd just strip the cash out in a manner that's tax efficient to the recipients and then apply for dissolution.Do be absolutely certain you've paid all off all the liabilities though, including HMRC.
The potential benefit from an MVL distribution (i.e. what's commonly known as "Entrepreneurs' Relief" - the pedants will correctly say it's now called Business Assets Disposal Relief but lots of people still call it ER, even the government on their website) is outweighed by the cost, hassle and delay at those values.
And just to help others - if you've got a very simple cash shell with all the liabilities settled, I've seen the going rate for MVL's now down to 3.5k so negotiate away!
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