Voluntary winding up a small Ltd. company.

Voluntary winding up a small Ltd. company.

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steveatesh

Original Poster:

4,007 posts

120 months

Thursday 2nd July
quotequote all
I am looking at winding up my small ltd company (wife is the other shareholder) which is solvent. Apart from a healthy business bank balance There are a few assets Such as photography equipment and IT stuff of varying age and worth but which I will keep. There are no debts to a third party at all.

So just a shout out to anybody who has done something similar, or has knowledge of how to do this please for hints, tips and possible banana skins to watch out for. Is there a simple to follow process for this, has it got to be done through a professional of one type or another, and approx costs?

Reason is the changing business market making it simply not viable any longer.

Thanks in advance.


StevieBee

8,807 posts

211 months

Thursday 2nd July
quotequote all
No need to go through a professional although your accountant will be able to deal with the assets you take out of the business as this may accrue capital gains tax.

Other than that, just need to notify HMRC, Banks, etc. If there's staff, they need to be given due notice and everything paid what is owed to them.

There's a form you need to fill in and send to Companies House. I think you need to prepare final accounts as well although this is for HMRC only (but check this out).


trickywoo

8,536 posts

186 months

Friday 3rd July
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You’ll need to take the cash out so depending on how healthy the balance is you could see quite a large tax bill.

It sounds like you don’t have and haven’t used an accountant for this company so you must know your way around company house and HMRC submissions. You could therefore close it yourself but be careful you don’t paint yourself into a corner tax wise.

I would recommend taking professional advice. It obviously depends on how comprehensive and good your records are but I would estimate a local type accounting firm would advise and do the necessary forms etc for £1k to £2k range. Just advice would be the lower end.

Wilmslowboy

2,921 posts

162 months

Friday 3rd July
quotequote all
I looked into this last year (that reminds I must do something about my ltd co)

Known as members voltantary liquidation - MVL

Takes about three months, needs to be done by a specialist insolvency practitioner - cost for a very simple 2 year trading IT contractor ltd co with zero debts - was best the part of £3k (inc vat).

Benefit was I could take the cash out of the company as capital gains as opposed to income/ dividends.



Pit Pony

2,816 posts

77 months

Friday 3rd July
quotequote all
Would it be cheaper and easier to.make it dormant?

Eric Mc

111,756 posts

221 months

Friday 3rd July
quotequote all
Winding up a company is dead easy. If there are no outstanding debts to third parties, then there is no need to go through any sort of liquidation process. All you have to do is apply to Company House for the company to be struck off. This costs the princely sum of £10.

HOWEVER, that's the easy part. If there are assets in the company, there will be tax implications as they are pulled out of the company and transferred to the personal ownership of the director/shareholder.
If the company is registered for VAT there could also be implications on the withdrawal or disposal of assets from the company.

Who needs pesky accountants.

steveatesh

Original Poster:

4,007 posts

120 months

Friday 3rd July
quotequote all
Thanks everybody for the above, no staff, no debts, none of the assets will have appreciated as they are just a camera equipment and a 6 year old Mac.

Just a shrinking market and the IR35 changes coming make it more challenging to do this now, so time to change back to self employed I think!

Appreciate your time with this.

beer


sleepezy

1,011 posts

190 months

Friday 3rd July
quotequote all
Practically this sounds as though it will depend on the healthy bank balance.

As others have said, at its simplest you can just withdraw the assets and shut the company - ensure you acquire the assets for fair value or accept them as a payment in kind for tax purposes. There will obviously be personal tax consequences which you should get formal advice on if you're not sure yourself.

However, if there's 'substantial' cash you're likely to be better to go through an MVL for a variety of reasons, not least tax. In which case, best to buy the assets from the company for a fair value (so there's only cash left in the business), make sure you settle all liabilities including VAT, CT and PAYE. You can then use one of the 'cheap MVL' specialists for a few £k to formally wind up the business - they will also give you the advice you really should be taking if you've been trading for a period and the process will ensure no (or more specifically limited, but that's pedantic) comeback. They'll obtain clearance from HMRC as part of the service to verify no outstanding taxes.

'Substantial' is subjective - so in my view if you end up with over 50k cash then i'd go formal - less i'd consider informal - there are both financial and risk benefits/rewards from going either way so it is a balance - and it's not just the value in consideration here, it's also the risk of any o/s contingent / unknown liabilities (which admittedly i'd expect to be low in your case).

If you have an accountant already I'd strongly recommend talking to them - an hour of their time would be a sound investment at this stage.

Eric Mc

111,756 posts

221 months

Friday 3rd July
quotequote all
Sounds like he never bothered with an accountant. A false economy now it would seem.

spikeyhead

11,712 posts

153 months

Friday 3rd July
quotequote all
Take all of the money out of your Ltd Co bank account before you shut the company down, otherwise what's in there goes to the taxman.

Eric Mc

111,756 posts

221 months

Saturday 4th July
quotequote all
spikeyhead said:
Take all of the money out of your Ltd Co bank account before you shut the company down, otherwise what's in there goes to the taxman.
The problem is how you declare that income in regards to personal taxation.

Is it -

Salary (Income Tax under PAYE and NI)

Dividend (Income Tax at the dividend tax rates)

Capital Gains Tax (eligible for Entrepreneur's Relief?)

A combination of some or all of the above.

Did the company make profits in its last or preceding years?
Is there any possibility of having any previous or earlier year Corporation Tax refunded?

What about VAT?

What about final Capital Allowance claims?

As I said, what use are pesky accountants?

deanobeano

357 posts

139 months

Saturday 4th July
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If the company assets are less than 25k than they can be taken out subject to capital gains taxation.

Strike off is the easy way (Form DS01).

I think the company should not have traded in the three months prior to the application.

If the assets are higher, then a MVL would make more sense.

johnnymiller

125 posts

133 months

Monday 13th July
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Doing exactly this at the moment. MVL, receiving the contents of the company bank account after all tax/MVL costs paid, and the company Tesla transfers to me as part of capital distribution. Just need to apply for entrepreneur relief in my self assessment and its all at 10%. As said above, more than 25k and MVL becomes more attractive than just taking it as dividends in the usual way. Only caveat on entrepreneur relief is that i cant start a Ltd, co doing the same thing for 2 years.....


red_slr

11,263 posts

145 months

Tuesday 14th July
quotequote all
OP, depending on your age and existing pension contributions over last few years and how much is in the bank you could look at paying a lump sum into a SIPP?