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Assets (stock ) distribution - closing Ltd company

Best practice for dividing stock assets between shareholders when closing limited company

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Hello AccountingWeb gurus,

During my brief time looking after our company accounts I've found the information on this site to be invaluable and hope you are able to help with this query.

We've reluctantly decided to pull the plug on our business and I was hoping someone might be able to help me understand the process of winding up the business , specifically the distribution of assets between shareholders.

The company has no debts, no employees and has not sold anything for 4 months. We are planning to have the company struck off the register but noted that a couple of things need to be done prior to filing the DS01 form, notifying HMRC of our intentions and deal with our assets and accounts.

We have money in the bank and assets (in the form of unsold stock) which we plan to divide equally between ourselves.

Am I right in thinking we can simply divide the remaining stock evenly between shareholders (paying VAT on the purchase/cost value of the stock), submitting our accounts and tax return to HMRC stating they are our final accounts and once settled split any remaining bank balance between shareholders and file the DS01 ?

Presuming the above is correct, can I allocate the stock to shareholders using journal entries or could someone advise of the proper way to do this ?

Replies (7)

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paddle steamer
By DJKL
30th Nov 2021 15:16

You possibly need to tidy things with vat first.

I would first deregister, depending on stock value you may need to account on final vat return for vat re stock in hand. return.

I would then do final accounts and CT600, lodge these, pay any CT and inform HMRC of intention to wind up company.

If less than £25k of value in company I would then do DS01, if more I would consider benefit of formal liquidation re tax on distribution.

Once DS01 in process would distribute assets, re stock get company to acknowledge transfer of ownership in writing.

P.S. The issue with handing stock to directors prior to wind up commencement is possible S455 loan issues, if you instead wait until deregistered this, imho, makes things simpler.

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Replying to DJKL:
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By KreativeKristian
30th Nov 2021 15:26

Thank you for the prompt response DJKL, it's greatly appreciated.
Your suggestion seems a perfectly logical way to proceed I'll discuss with other director and action is ASAP.

With regards to informing HMRC of the intention to wind up the company, is there an official (form) to complete or proper way to do this ?

Thank you again for taking the time to help.

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Replying to KreativeKristian:
paddle steamer
By DJKL
30th Nov 2021 16:00

When you do the CT600 covering the final period of trade you will do one to the date of cessation of trade which likely is not company's year end ,so they sort of get the idea re what is happening from that return, but what I have tended to do is write them a letter explaining so that hopefully when you are winding up the company they do not object.

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Replying to KreativeKristian:
paddle steamer
By DJKL
30th Nov 2021 16:05

https://www.gov.uk/vat-registration/cancel-registration

Note threshold re assets in hand on deregistration (vat of £1,000) .

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Replying to DJKL:
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By KreativeKristian
09th Dec 2021 10:26

Apologies for not getting back to you sooner.

Just received confirmation of VAT deregistration. Will look to process the final accounts and file CT600.

Thank you again for your help, it has helped me enormously.

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Lisa Thomas
By Lisa Thomas
01st Dec 2021 16:30

If the assets are significant you might want to wash it through a Members Voluntary Liquidation ("MVL") and distribute the assets in specie to the shareholders (or sell the assets and distribute the cash instead).

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Replying to Insolvency Practitioner:
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By KreativeKristian
09th Dec 2021 10:30

Hi Lisa,

Thank you for your response, this is something I'll bear in mind if I'm ever in this position again but present company's assets aren't even going to cover the cost of an accountant. I just want to make sure I wrap it up properly and by the book. :)

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