Close company or make it dormant

[Maslins]

The issue is my year end is September, and my probationary period ends in December. I don't really want to pay another years accountancy fees, insurance fees etc on the off chance I need to use the company, hence my question about making the company dormant. I was under the impression from the gov.uk website and other accountancy / contracting sites that it was possible to make your company dormant once you had ceased trading and done a final set of accounts at year end, cancelled payroll etc.

"Making a company dormant" isn't really a thing. There's no one switch you/your accountant can flick that then means the company is dormant.

Always a bit tricky with these things as we on the forum don't know the full story and there might be significant relevant things not mentioned in your posts, but my view from what you've said would be:
- stick with your accountant, still paying the monthly fees, still submitting payrolls (albeit probably £nil), still submitting VAT returns (again will have naff all on them), until your probationary period ends. This just means if you did leave the PAYE role and want to revert to contracting, you've got a vehicle ready and waiting, which can easily put you back onto the payroll, is already VAT registered etc.
- assuming there is no company income after 1 Oct 19, you shouldn't need to do a set of accounts or CT return for a period after 30 Sep 19.
- if the PAYE role does work out well, your accountant should be able to do accounts/CT for year ended 30 Sep 19, potentially accruing for the modest costs (eg their fees, bit of insurance etc) incurred afterwards. Perhaps these be done in January once you're confident you're sticking with the day job.
- you then settle the final CT liability, and tidy up any other balance sheet items as appropriate, and look to close the company (prob via cheap and cheerful DS01 if final net assets will be sub £25k).

[BolshieBastard]

Save yourself time and hassle. Just wind it up. Your 10 year standing limited will count for very little extra kudos if it is dormant for a couple of years and starts trading again.

No 'new' contractor would ever get a role if a 'new' limited co was an issue. It isnt and never will be.

[northernladuk]

Many accountants charged reduced fees if you aren't trading.

[doconline]

Agree with Craig, especially with regards to general:
- keep company ticking over fully until you're at least through probationary period, and confident you'll stick with the employer/they'll stick with you.
- after that, I'd probably close it. I do think sometimes people get a bit of an irrational sentimental attachment to their Ltd Co. Ie they have no use for it, and creating a new one is very quick and cheap, but they can't quite bring themselves to "kill" the old one!...do it!

Thanks for the replies. I agree about keeping it going until after the probationary period. The issue is my year end is September, and my probationary period ends in December. I don't really want to pay another years accountancy fees, insurance fees etc on the off chance I need to use the company, hence my question about making the company dormant. I was under the impression from the gov.uk website and other accountancy / contracting sites that it was possible to make your company dormant once you had ceased trading and done a final set of accounts at year end, cancelled payroll etc, but Craig's reply above says that is not possible. That is the confusing thing.

[Maslins]

Agree with Craig, especially with regards to general:
- keep company ticking over fully until you're at least through probationary period, and confident you'll stick with the employer/they'll stick with you.
- after that, I'd probably close it. I do think sometimes people get a bit of an irrational sentimental attachment to their Ltd Co. Ie they have no use for it, and creating a new one is very quick and cheap, but they can't quite bring themselves to "kill" the old one!...do it!

[Craig@Clarity]

What have I done now? *innocent*

Pop over to claritytaxation.com for a brew

[northernladuk]

Tut tut Craig. I thought you got enough of a spanking at home without inviting the Mods to give you one as well.

[Craig@Clarity]

From a technical point of view it won't be dormant anymore since you've traded through the company. It'll effectively be "non trading" or put on hold/ticking over. Nonetheless you'll still need to file accounts with Companies House and CT returns with HMRC every year, even if it's just flipping the figures over.

I would always suggest to keep the company going for a few months when you go into your perm role. I've seen many cases where clients have found it's not the life for them and jumped back into their company. I had people adamant they want to close their company down right away, gone perm, hated it and wanted their company reinstating. It can be done but takes a lot more work to reverse the process.

If after a few months, you're happy where you are, then think about closing it. If you're worried about mortgages, then lenders will look at affordability (previous tax returns submitted, current salary and payslips). If you're thinking of stripping the company right down by taking dividends, then the company isn't going to show any retained profit anyway so it's going to be of much help.

Columbo moment: one more thing...if you're a higher rate tax payer and you take all your profit out as dividends, I'd recommend putting 32.5% of it aside in your personal account for taxes later.

Pop over to claritytaxation.com for a brew

[doconline]

Make it dormant or having it sitting there with no transactions going through? They are different things.

How much is in the bank? If you need to use ER to close it you can't start again for 2 years so need to think about how long you really will be perm for.

Personally I'd look at it from tax efficiency perspective first and get some numbers from my accountant about just empty it, emtpy and close or take money or trickle over the years in perm. That might give you extra ideas about what to do.

Thanks for the reply. I don't really want to just have it sitting there open with no transactions, as I would still need to file accounts / have insurance etc, so would be costing me money to have it sat there. So would need to be either dormant or closed.

There isn't enough in the bank to worry about ER really, plus if I go back to contracting within 2 years I don't want to have to go through an umbrella because of phoenixing.

My accountant isn't a great one for ideas on things or pro active advice, if I come back to contracting will definitely be getting a new one.

I think registering it dormant for a year may be the best idea. That will get through the start of the IR35 post April, plus my probation period in the perm role. I can then close the company after that if I want to I guess.

[northernladuk]

Make it dormant or having it sitting there with no transactions going through? They are different things.

How much is in the bank? If you need to use ER to close it you can't start again for 2 years so need to think about how long you really will be perm for.

Personally I'd look at it from tax efficiency perspective first and get some numbers from my accountant about just empty it, emtpy and close or take money or trickle over the years in perm. That might give you extra ideas about what to do.

[doconline]

Just wondered what the general consensus was about closing down my ltd vs making it dormant for a year or 2.

I have had my company for over 10 years now, so well established etc. I have recently taken a permanent role at a start up, which was a good offer / equity etc, also wanting to see how the landscape pans out with the IR35 changes next year. My company year end is end of September, so I need to decide what to do regarding my company. I can either close it down or make it dormant.

My thoughts are I will be in the perm role for at least a couple of years. However, things may change and I may go back to contracting sooner rather than later. I have looked at both closing it down and making it dormant, my main worry is if I make it dormant I think it is still a legal entity, so potentially could get caught up in legal matters. I don't think I will not be able to buy and insurances etc as if you buy / sell anything the company automatically loses dormant state. I am not worried about IR35, as I get all my contracts checked and am pretty careful about working practices etc. I don't have too much to worry about from a getting sued by a client as I am a front end developer, all my work is signed off by the end clients before it goes live and can't really cause any damage to a client that would cause them to come after me in a legal manner.

I am thinking that from a personal finance point of view, it might be better to have it dormant so if I do go back to contracting when it comes to mortgages etc I can show I have been running the company for a significant amount of time, all be it with a dormant period whilst being a permie, so this may go in my favour with banks etc. I am going to take the remaining money out of the business anyway as dividends and close the business bank account down either way. So there isn't a pro / con there.

Any thoughts?