Closing your Limited company is not as simple as closing the bank account and walking away; certain formalities need to be followed.
To close a company, you must either go through liquidation or a simple strike off of the company. In order to determine which route is right for you, we need to take into consideration the total value of your assets and funds at your cessation date.
The strike off process
If the total value of assets and funds to be distributed is less than £25,000 then you can close your company down via a simple strike off. The amounts distributed will be treated as a Capital Gain and Entrepreneurs Relief may be available.
Orange Genie Accountancy will prepare cessation accounts for your company and will ensure that you complete all final returns and deregister for all relevant taxes. We will report the distribution of assets and funds on your self-assessment tax return and make sure that the company is struck off from the Companies House register.
This whole process can take between 3 and 6 months to complete, depending on how quickly your books and records are up to date and documents are returned to us.
Members Voluntary Liquidation
If your company has assets and funds in excess of £25,000, you will need to follow a more formal liquidation route (an MVL) and this must be overseen by an Insolvency Practitioner. Orange Genie Accountancy is not a registered Insolvency Practitioner but we have an established relationship with Opus Business Services Group, which are registered to oversee such liquidations. We work closely with them to prepare your cessation and liquidation accounts. We’ll also complete your final self-assessment once the liquidation is complete.
There are higher costs involved with an MVL but these are usually more than exceeded by the tax savings available on your final distribution. If the value of your assets and funds are marginally higher than £25,000, we can advise on whether the tax saving from an MVL will exceed the fee required to take this option. If it does not make financial sense, Orange Genie Accountancy can work with you to make alternative, more tax-efficient plans.
Assuming your income in the year has already or will exceed the higher rate threshold, we calculate that for any distributions in excess of £36,000 the appointment of a liquidator is likely to yield the highest return, after having paid all taxes and professional fees. This assumes that Entrepreneur’s Relief is available on the Capital gain.