How to Close Your Limited Company
Complete guide to closing down your limited company properly, including strike-off, MVL, and tax implications.
What You'll Need
- Up-to-date accounts
- All outstanding returns filed
- List of creditors (all paid)
- Bank account balance
- Companies House authentication code
Step-by-Step Guide
Decide on the closure method
Strike-off (cheap, for small companies <£25k assets) or Members' Voluntary Liquidation (for larger amounts, gets BADR).
- •Strike-off costs £10
- •MVL costs £1,500-3,000+
- •MVL better for amounts over £25,000
Settle all outstanding obligations
Pay all creditors, collect outstanding debts, and settle any HMRC liabilities. Company must be solvent.
- •Pay all suppliers
- •Collect customer debts
- •Clear director's loan accounts
File all outstanding returns
Ensure all accounts, Corporation Tax returns, VAT returns, and Confirmation Statements are filed.
- •File final accounts to date of cessation
- •Deregister for VAT
- •File final payroll returns
Stop trading
The company must not have traded in the last 3 months for strike-off. Close bank accounts and stop all activity.
- •No new invoices
- •No purchases except winding up costs
- •Inform customers and suppliers
Distribute remaining assets
For strike-off: distribute before applying (treated as capital if under £25k). For MVL: liquidator handles distribution.
- •Under £25k: treat as capital distribution
- •Over £25k: use MVL for BADR
- •Keep evidence of distributions
Apply for strike-off or appoint liquidator
Strike-off: file form DS01 with Companies House. MVL: appoint licensed insolvency practitioner.
- •DS01 costs £10 online
- •Must notify all interested parties
- •3 months to object to strike-off
Notify HMRC
Tell HMRC the company has ceased trading and is being dissolved. They may raise final assessments.
- •Write to Corporation Tax office
- •Cancel VAT registration
- •Close PAYE scheme
Company dissolved
After the objection period (strike-off) or liquidation process (MVL), company is dissolved and ceases to exist.
- •Keep records for 6 years
- •Any assets become Crown property
- •Can restore within 6 years if needed
Common Mistakes to Avoid
Not filing all outstanding returns
Forgetting to notify HMRC
Distributing over £25k without MVL (taxed as income)
Not keeping records after closure
Frequently Asked Questions
What is the cheapest way to close a limited company?
Voluntary strike-off is the cheapest method, costing just £10 for the DS01 form filed with Companies House. This is suitable for solvent companies with no assets, debts, or pending legal actions. The process takes around 3 months from application to dissolution.
Can I close my company if it has debts?
If your company cannot pay its debts, you may need to enter formal insolvency proceedings such as Creditors' Voluntary Liquidation (CVL). This requires appointing a licensed insolvency practitioner. Simply striking off a company with outstanding debts can result in personal liability for directors.
Do I need to file final accounts when closing a company?
Yes, you must file final accounts and a Corporation Tax return with HMRC covering the period up to the date of cessation. You also need to file any outstanding confirmation statements with Companies House. All tax liabilities must be settled before dissolution.
How long does it take to close a limited company?
Voluntary strike-off typically takes about 3 months. A Members' Voluntary Liquidation takes 6-12 months but is more tax-efficient for companies with significant assets. The timeline depends on settling all liabilities, distributing assets, and completing HMRC clearances.
Can I extract retained profits tax-efficiently when closing?
If distributing over £25,000, a Members' Voluntary Liquidation allows the distribution to be taxed as a capital gain (at 10% or 20%) rather than as a dividend (up to 39.35%). Business Asset Disposal Relief may reduce the rate to 10% on the first £1 million of qualifying gains.
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