Cessation of Contracting
Whether you’re retiring, going back into permanent employment forever, or your circumstances change, there will potentially come a time when you will need to close your Limited Company.
But how do you go about it and what steps do you need to take? Director of Operations, Laura Hepworth takes you through the stages, to ensure you get the best outcome.
Extinct or just sleeping?
Whilst you may think that closing your company is the right option, it might be worth exploring whether you’re better off by putting your Limited Company in a dormant state.
In short, a dormant Limited Company is not trading, but is still required to prepare and file accounts with Companies House, submit a Corporation Tax Return and submit accounts.
If you are no longer contracting, but may return to contracting in the future or wish to keep your company name protected, then putting your company into a dormant state is the right step for you.
If you have decided that closing your company is the right choice for you, then you must first start off by asking yourself whether your Limited Company can settle its debts. If your company doesn’t have sufficient funds to pay your creditors in full, then it makes closing your company a much more involved process, which you’ll require professional assistance in doing so.
Closing your company
Assuming your company is able to meet its financial obligations, the process of actually closing the company is complex yet relatively straightforward.
Firstly, start by deciding on the date you wish to close the company. It’s important not to process any further transactions after this date, other than those required as part of the closure process.
HMRC will need to be notified of your decision to close your company as soon as you have decided on the date. We advise holding off from submitting your final accounts when you inform HMRC, as you may have some late-occurring expenses which will need to be accounted for. If VAT registered, you will need to cancel your registration. You’ll also need to pay any outstanding PAYE and/or National Insurance Contributions (NICs), run a final payroll to obtain P45s for yourself and any staff you employ and submit a P35 Employer Annual Return.
As soon as you know there are no further funds going in or out of your company, it’s time to close your business bank accounts and then prepare and submit your final accounts. The Corporation Tax due will be calculated by HMRC, which must be paid within nine months (although it’s recommended to do so as quickly as possible, as the company cannot be closed until all money owed has been paid). Once completed, any money remaining should be taken as a dividend.
Remember! Not to leave any funds are left in your company’s business bank account(s) as anything left can revert to the Crown.
Three months after your Limited Company has ceased trading, use the DS01 form from Companies House to dissolve your company. You will then enter a consultation phase with Companies House, where they publicise the proposal to strike off your company. This gives any interested parties the opportunity to challenge the process and should there be no objections or difficulties (or you change your mind!) your Limited Company will be struck off the Companies House register.
Closing your Limited Company is a big step to take and one that you shouldn’t take alone. The first person you should discuss your plans with is your expert Personal Accountant, as they will be able to offer your tailored advice and support throughout the entire process.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.