Closing your company

[SimonMac]

Been "inside" for about 2 years so thinking it's time to close the company, I have managed to fire as much into my pension as possible and with his years contributions I can get the cash in the company down to under the capital treatment threshold of £25k so don't need to bother with the MVL rotue

As I understand it the process is quite simple

1. Dispose of any company assets (bascially buy them from the company at fair price)
2. Deregister for VAT (should this be done before or after above)
3. Deregister for PAYE
4. File your accounts and company tax return, stating that these are the final trading accounts and that the company will soon be dissolved
5. Pay any liabilities
6. Close bank and distribute any asstes (as it will be under £25k, the two shareholders have a CGT allowance of £12300 there should be no tax to pay personally)
7. File a DS01 with companies house

The only part I am unsure about is the fact when I file my final accounts HMRC will owe me money () any idea how long this will take to get back as it will fall between setps 5 and 6. Most of what I have read says HMRC don't like giving money back they want to use it to offset any future payments.

[Fred Bloggs]

Been "inside" for about 2 years so thinking it's time to close the company, I have managed to fire as much into my pension as possible and with his years contributions I can get the cash in the company down to under the capital treatment threshold of £25k so don't need to bother with the MVL rotue

As I understand it the process is quite simple

1. Dispose of any company assets (bascially buy them from the company at fair price)
2. Deregister for VAT (should this be done before or after above)
3. Deregister for PAYE
4. File your accounts and company tax return, stating that these are the final trading accounts and that the company will soon be dissolved
5. Pay any liabilities
6. Close bank and distribute any asstes (as it will be under £25k, the two shareholders have a CGT allowance of £12300 there should be no tax to pay personally)
7. File a DS01 with companies house

The only part I am unsure about is the fact when I file my final accounts HMRC will owe me money () any idea how long this will take to get back as it will fall between setps 5 and 6. Most of what I have read says HMRC don't like giving money back they want to use it to offset any future payments.

Last time I did it and got a corporation tax refund was sometime ago so not really current. But back then I was pretty soon sent a cheque, not long at all.

It's now easier than ever to strike your company off. I struck off my last Ltd Co in December last year. Once you have everything sewn up I think it was about three mouse clicks to flag the company for strike off. The DS01 process is now entirely online. In fact, I was a bit shocked how easy it was to do it these days! If only everything we do was so slick.

[Maslins]

Yeah your list looks fine. HMRC certainly do issue refunds (it's only PAYE where their default seems to be to wait until the next liability to offset it against). CT refunds are reasonably common. It does seem like standard timeframe for these is currently months rather than weeks. If it's £10 you're due back you may decide not to bother waiting. If it's £10,000 then of course do chase it up before submitting the DS01.

[genji7]

Hi, I came across this page as I'm considering the same stuff. It's been great to read the posts related to similar topics and I'm hoping to receive some valuable advice, please.

After working remotely overseas for a year + a year career break, I just started a new inside gig overseas. As I don't know when I will engage with the UK client for the outside work, I've been considering whether to make it officially dormant (already on the reduced fee with accountancy but the company status is just 'non-trading', not 'dormant') or close it as it's been 3rd year of no trading.

Personally, I don't mind keeping it if the maintenance fee is minimal. But after consulting with an accountant, it seems like I need to prepare to change the status for the official dormancy since the company account has been active for the current year according to the accountant. i.e. need to wait for April 2023.

I wonder if this is the usual practice as I'm not so keen to deal with admin stuff + a monthly fee. My plan was to make it officially dormant with some funds left (ideally no funds as I won't be able to access it during dormancy but there will be even after declaring the max basic rate dividends this year) and do the yearly accounting by myself or hire specialist do this with one-off fee.


For closure, the accountant quoted £300 to handle the steps described here and they're checking if any difference due to non-residency status. I wonder if these steps can be done by myself except for the final company return which might be covered by the monthly fee. It would be great to know if anyone did it by themself as the steps seem straightforward from the previous posts.

The problem is that I only can make the company funds down to £26k after withdrawing the max dividends within the basic rate for the current tax year and I wonder if this situation would prevent me to go down the dissolving a company this year. Does it seem like I can distribute this to a pension? to make it under 25k but I haven't been contributed to pension from the company account so not very familiar with the process. Is this something I need to check with the accountant?


Any advice would be appreciated. Thank you.

[northernladuk]

Just distribute the extra 1k in to the next tax bracket? It's hardly a fortune.

[genji7]

Thanks for a point that I certainly was missing, northernladuk!

[Chaytor]

I've been looking into doing the same via MVL but the questions I can't get answers for regard my future options in IT.

My understanding is that I can't open another ltd company operating in the same primary business area. Or can I? Would I be prevented from doing this by virtue of the fact that HMRC would declare my ER from the wind up of my ltd to be invalid and come looking for repayment plus penalties therefore making it unviable?

Also as I understand it, I would be able to continue operating inside IR35 through a brolly.

Thanks.

[northernladuk]

I've been looking into doing the same via MVL but the questions I can't get answers for regard my future options in IT.

My understanding is that I can't open another ltd company operating in the same primary business area. Or can I? Would I be prevented from doing this by virtue of the fact that HMRC would declare my ER from the wind up of my ltd to be invalid and come looking for repayment plus penalties therefore making it unviable?

Also as I understand it, I would be able to continue operating inside IR35 through a brolly.

Thanks.

Correct but just a point. You can't open another company in the same area for 2 years. IT Consultancy is such a broad activity though so it will cover pretty much anything IT (we think). Would moving from coder to PM be considered same area? Some argue not but if you have the skills to consult in both areas you'll still be an IT consultant so probably caught. After the 2 years then fill your boots.

Yes a brolly is fine as you aren't just phoenixing to gain a tax advantage if you move from MVL'd LTD to umbrella.

But whatever you do, DO NOT go forward based on the advice from a bunch of contractors. Speak to an MVL specialist and your accountant to get the full picture. It will be a very costly mistake if you don't get it right and you'll be stuck for 2 years so some forward planning is key. We are already getting a steady flow of people who did a knee jerk MVL because they were going inside and they've finally realised inside isn't the end of their contracting career, it's just another gig with a different tax wrapper. They will be losing most, if not all of the tax advantage from the MVL now they are via brolly even on outside gigs for the next 2 years.

[Lance]

I've been looking into doing the same via MVL but the questions I can't get answers for regard my future options in IT.

My understanding is that I can't open another ltd company operating in the same primary business area. Or can I? Would I be prevented from doing this by virtue of the fact that HMRC would declare my ER from the wind up of my ltd to be invalid and come looking for repayment plus penalties therefore making it unviable?

Also as I understand it, I would be able to continue operating inside IR35 through a brolly.

Thanks.

it's nothing to do with ER (now called BADR).

It's to do with the money being a capital distribution rather than dividends.

[jamesbrown]

I've been looking into doing the same via MVL but the questions I can't get answers for regard my future options in IT.

My understanding is that I can't open another ltd company operating in the same primary business area. Or can I? Would I be prevented from doing this by virtue of the fact that HMRC would declare my ER from the wind up of my ltd to be invalid and come looking for repayment plus penalties therefore making it unviable?

Also as I understand it, I would be able to continue operating inside IR35 through a brolly.

Thanks.

The TAAR means that any dividend distribution or self-employed income you receive from the same or a similar trade or activity to an earlier company, from which you received a capital distribution less than two years prior, is liable to render the capital distribution invalid; that is, render it a dividend distribution, subject to dividend tax. The TAAR is separate from ER/BADR, which is merely a personal tax relief, but it does mean that the difference between the capital and dividend distribution is much larger, i.e., you would need to pay back more when caught by the TAAR.