Dissolving company and assets

[Plymouth]

Hi, I've been contracting for six months now and I'm really enjoying it. I'm not considering moving back into permanent employment just yet but when/if I do I'm assuming I would dissolve my ltd company, pay any outstanding VAT/PAYE tax/NI, plus any other bills, and whatever is left is mind as the director of my company?

I appreciate this is a real newbie question but as I see my business account grow it suddenly occured to me 'do I keep this money' if I go back to a permanent position.

[Sockpuppet]

Worry about that when it happens. Generally yes after all liabilities are paid off the rest of the assets are shared amongst the shareholders.

[ClearSky Accounting Dan]

Hi, I've been contracting for six months now and I'm really enjoying it. I'm not considering moving back into permanent employment just yet but when/if I do I'm assuming I would dissolve my ltd company, pay any outstanding VAT/PAYE tax/NI, plus any other bills, and whatever is left is mind as the director of my company?

I appreciate this is a real newbie question but as I see my business account grow it suddenly occured to me 'do I keep this money' if I go back to a permanent position.

If you're not using the company you can either close it completely, or leave it ticking over dormant. If there's a chance you may use it again then it's an idea to keep it open, that way you avoid the costs and admin of closing down only to then set up again. A dormant company still has to file accounts and tax returns, but the costs should be reduced each year because you wouldn't need full trading accounts, payroll, VAT etc.

Regarding closing the company, it’s a relatively straightforward process, although it does take time. The first step is to ensure all money is collected/paid and then close the company bank accounts, transferring any money to a non-interest bearing personal account – this will later be used to pay any final corporation tax liability. Final accounts are prepared, and the final tax liabilities established. When all tax has been paid, your accountant can apply to Companies House for striking off – they will advertise in the London Gazette for 3 months before finally dissolving the company (assuming no objections from creditors).

Any money left within the company (that was transferred to the other bank account but not used to pay tax) will either be a final dividend or a capital distribution (subject to capital gains tax).

An individual currently has an annual exemption on capital gains of £10,600 with any amounts exceeding this figure likely to be taxed at only 10% following the application of Entrepreneurs Relief. From 1 March 2012 the amount that can be distributed in this way is limited to £25,000. You will still be able to treat funds above £25,000 under the rules for capital gains tax, although to do so, the company will require formal liquidation by an insolvency practitioner.

If you do decide to make the company dormant for a while, it is important that it does not stay dormant for a period exceeding three years. Entrepreneurs Relief will no longer be available where a company has not traded in its final three years. In addition, Entrepreneurs Relief is only available to individuals who have been an officer or employee of the company for the previous 12 months and hold at least 5% of the shareholding in the company.

[Greg@CapitalCity]

...and whatever is left is mind as the director of my company?

Yep, but when you pay yourself whatever is left this might give rise to a personal tax liability (so you may need to pay some of it over to the HMRC). How much of a liability depends on numerous factors - and once you get some hard facts and figures come back onto the forum and we'll give you some pointers.