It is a sad fact that many businesses fail in their first year and end up closing. Sometimes companies close for more positive reasons such as moving on to a new venture, selling the business, retirement, or moving back into employment or self-employment.
Whatever the reason, there are certain things that need to be done to close a limited company. I’ll talk through a few of the steps here, but as always, it is best to talk through your situation with an accountant who can advise you on specifics.
Cease trading
The first thing you will need to do is to cease trading. A business needs to have not been trading for three months prior to requesting a closure with Companies House. Make sure you know the date on which you stopped trading. It may be something you want to plan in advance. This is likely to be especially true if you sell to customers from your business premises as you will probably not want to be incurring premises costs without any income to contribute towards them.
De-register for VAT
If you are VAT registered, it makes sense to deregister as soon as you finish trading to prevent any additional costs of preparing VAT returns when your company is not trading.
Complete a final set of accounts and Corporation Tax return
It will be important to ensure that all your accounts are completed and submitted to Companies House and your final Corporation Tax return submitted to HMRC so that you know any tax liability which is due. It is possible you may have made a loss in your final year, and if so you may be able to carry it back against earlier profits and potentially be due a tax rebate.
Pay your creditors
When you request to close your company, a notice will be put out which will allow any creditors (including HMRC) to object to the closure. If you ensure that your creditors are all paid off, then there will be no-one able to object to your company being closed on these grounds.
Request closure with Companies House
The formal process to request closing your company can be done here.
It is something that you can complete yourself as a business owner and it doesn’t take too long to do so. There is a fee for the application (currently £8). If you need assistance, your accountant may be able to begin the process for you.
Once you have filled out your application, your company will usually be closed in roughly 3 months time.
Close bank account
Make sure you close your business bank account. If there are any funds left when the company is closed they become property of the Crown, so you need to make sure this is done prior to the official closure. If you have any money left after paying off your creditors, you may need to declare the remaining funds as dividends. These will need to be noted on your next personal tax return.
