It’s a sad fact that many businesses close within their first year. Not all closures are negative - some business owners move on to new ventures, sell the company, retire, or return to employment or self-employment.
Whatever the reason, there are a few key steps you’ll need to take to close a limited company properly. Here’s a brief overview. As always, it’s best to speak with an accountant to ensure everything is handled correctly for your situation.
1. Cease Trading
The first step is to stop trading. To apply for voluntary strike-off with Companies House, your company must not have traded or carried out any business activity for at least three months.
Make sure you know the exact date you stopped trading, and plan ahead if needed. For example, if you operate from a premises, you’ll want to avoid incurring rent or utility costs without income to cover them.
2. De-register for VAT
If your company is VAT registered, it’s wise to deregister as soon as you stop trading. This avoids the need to file unnecessary VAT returns and keeps your admin to a minimum.
3. Final Accounts and Corporation Tax Return
You’ll need to prepare and submit a final set of accounts to Companies House and a final Corporation Tax return to HMRC. This ensures your tax position is finalised and any liabilities are settled.
If your company made a loss in its final year, you may be able to carry it back against previous profits and claim a tax refund, so it’s worth reviewing this with your accountant.
4. Pay Your Creditors
When you apply to close your company, Companies House will publish a notice giving creditors the opportunity to object. If all debts - including any owed to HMRC - are cleared in advance, there should be no grounds for objection.
5. Apply for Strike-Off
The formal process to request closing your company can be done here. The application fee is currently £8.
You can complete this yourself, or your accountant can handle it for you. Once submitted, the company will usually be struck off the register in around three months, assuming there are no objections.
6. Close Your Business 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 there are surplus funds after paying creditors, these may need to be declared as dividends and reported on your next personal tax return.
