How to close a limited company

GOV.UK sets out the routes according to the company's position.

Strike off suits a company that has wound down its activities. Companies House guidance says a company cannot apply if, in the last 3 months, it has traded or carried on business, changed its name, or disposed of property or rights it held for gain in the normal course of its trade, or if it is subject to insolvency proceedings.

The steps, in outline, are:

• deal with the company's assets before applying, because GOV.UK warns that any left at dissolution pass to the Crown
• file the strike off application, which must be signed by a majority of the directors
• within 7 days, send a copy to shareholders, creditors, employees, pension fund managers or trustees, and any directors who did not sign
• wait for the notice in The Gazette, which gives the strike off date, usually within 2 months of the notice and in some cases within 28 days

If nobody objects, the company is struck off once that period has passed, and a second notice confirms that it no longer exists. Objections have to be delivered at least 2 weeks before the strike off date. Companies House is clear that strike off is not an alternative to formal insolvency proceedings.

Closing a company still means finishing its paperwork with HMRC as well as Companies House, such as final accounts and a final company tax return, any payroll or VAT registrations, and paying any tax owed, so check with HMRC or an accountant what applies to your company. Directors may also need to report income from the company on their own tax return.

How you take out money that is left matters for tax. Money paid out before strike off, or by a liquidator in a members' voluntary liquidation, can be taxed differently depending on the route and amounts, and any outstanding director's loan account will need to be dealt with. This is an area to take advice on before you act, because the order of steps can change the tax.

A members' voluntary liquidation is for a solvent company, often one with more to distribute. GOV.UK sets out the steps: the directors make a declaration of solvency that the company's debts will be paid within no longer than 12 months, signed by a majority of the directors before a solicitor or notary public; no more than 5 weeks after it is signed, the shareholders pass a resolution to wind up and appoint an authorised insolvency practitioner as liquidator; the resolution is advertised in The Gazette within 14 days; and the declaration is filed at Companies House within 15 days of the resolution.

Only an authorised person can act as an insolvency practitioner. The Insolvency Act 1986 makes acting without being qualified an offence.

GOV.UK says a company that cannot pay its bills can arrange a creditors' voluntary liquidation or go into administration, both of which involve an insolvency practitioner. Directors in this position should get advice early from an authorised insolvency practitioner. Keeping up with filing deadlines still matters while a decision is made.

If you might use the company again, GOV.UK says you can keep a limited company dormant for as long as you want, as long as it is not trading or receiving income. It still files annual accounts and a confirmation statement, and directors still need to verify their identity. Our page on accountants for limited companies covers ongoing work, and if you would like help closing a company we read every enquiry and, where we can, put you in touch with a local accountant through our enquiry form.