Dissolving a Limited Company using DS01 (section 1003 Companies Act 2006)
I have a client with a 30 April year end who is looking to wind up the company. This is an area that I am not that familiar with, but do have a certain amount of knowledge, so I just wanted to clarify some points. The company has been running for around 2 years but has never made a profit, and as a result has negative reserves. It is ower managed and has continued to run only because the directors have been pumping personal funds in through the directors loan accounts. In terms of size it is tiny (around £10k turnover last year and probably less this year, although I havn't seen the figures yet. Last years balance sheet was negative - around £5k. Share capital £100.). I don't think the individuals that started it up have any real business competence, and are looking to move back into employment, having had an extremely rough time. I have been told (although as yet I have been unable to confirm as I have not compiled the accounts) that the business has no creditors, therefore a section 1003 dissolution should be possible. There are however a couple of points I want to be clear on:
1, In order to apply for dissolution the company has to cease commercial activity for 3 months. Realistically, that would take say a month (probably less) to cancel all items (insurance, telehone etc). This would take the start of its dormant period to the end of April/beginning of May. Companies House do not chase compliance once a DS01 has been received, however hmrc will be looking for tax returns (and cessation accounts). Would it therefore make sense to extend the accounting period to say 15 months to avoid having to compile 2 sets of accounts? (I know you would still need 2 CT600's, but I'm just thinking this would reduce the work load).
2, The company has a small amount of assets (mixture of cash and some equipment eg, computer, vehicle). There are also directors loan accounts, although I expect the value of these will be less than the value of the assets of the company. Once everything else has been paid (any tax, my fees, companies house etc), it is likely that the remaining items will be the equipment. If the directors decide to retain any of these items rather than sell them, then obviously, there is the option to extract items using the former Esc 16 concession (I doubt the value of the assets would even exceed the £10600 capital gains exemption, let alone the £25,000 limit). Would I however, have the option to write off some of the assets against the directors loan accounts (if positive balances are left) to try and preserve as much of the annual exemption as possible? I don't think they are likely to have any further capital gains this year, but it makes sense to plan ahead just in case.
3, With regard to applying for the new Esc 16, is the application procedure still the same? ie, do you still need to write a letter to HMRC, or is there now a form that needs to be completed, since the concession has become statutory?
4, Further, in relation to Esc 16. The company has negative reserves, which means it can't pay a dividend. Does this mean that Esc 16 is not possible, and if it is, is the dividend just processed as a normal one through the cessation accounts?
5, With regard to informing HMRC for CT purposes, my understanding is that they need a letter plus a copy of the form DS01 sent to Companies House. My understanding is that the letter is sent when the company ceases to trade - which results in a CT600 being due for this period end. A further CT600 will be due for the period between when trade ceases, and the date the company is dissolved (which will be later than the date the DS01 is sent out). Please correct me if I am wrong on this.
6, No action is needed re the share capital (£100), since it is below the limit that the treasury have set for waiving bona vacantia (£4000).
I appreciate these are probably stupid questions, but it is an area that I have relatively little experience of, so I just want to be sure. In advance, I already know that if it is insolvent, it has to go to a licenced insolvency practitioner, but my understanding from the client at present is that there isn't much left and everyone will be paid.
Thank you in advance.
- Corporation Tax Software 371 11
- Partnership Tax Return £100 penalty-was a tax return due in this case? 650 18
- How to end partnership for HMRC 63 1
- Auto enrolment 103 1
- First year's sole trader accounts and 2014/2015 tax return 87 1
- Electric Vehicle company car battery rental - how is it taxed? 79 4
- Regular Director bonus 430 11
- Careers advice - is it worth moving from an SME to a corporate? 141 1
- Registration as self-employed 106 1
- BrightPay 1,086 35
- HMRC Summons for £14k 516 7
- SA REFUND; DEFRAUDED BY UNKNOWN PARTY 333 5
- Footballers Testimonials Taxable? 1,087 17
- Clients have been told I'm working from home 968 13
- BIK for an electric car 158 2
- New Practice - Accounting Software 3,624 90
- How do I save face? 2,342 14
- Goodie bag 3,086 72
- US Pensions and Renunciation of Citizenship 115 1
- How many associated companies 194 2
- Possible Partnership? 685
- Tax and accounting treatment on long lease granted from freehold 533
- Fuming! 510
- New Fangled Penalties 466
- Purchase of property freehold - capitalisation of costs 332
- Charity dissolution and newly merged charity 273
- Moving away from CCH software 263
- Lenovo – Superfish & Komodia – is your PC vulnerable 255
- Outsource Data Entry 253
- Do I need a US Tax Identification Number to complete W-8BEN-E? 206