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How should I wind up my company?

Looking for advice on winding up my limited company

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Hi all,

I've run a small business for the past 5 years.  Covid has taken its toll over the last few years and my turnover has gone from 20k per year to less than 5k.  The company made a very small profit (something in the order of 300 pounds) in 2019-20 but I don't think it's generated any real profit since then.  I've never drawn funds down to pay myself and the company owes me 2k yearly in dividends which it's never been able to afford to pay me.

The company did have numerous assets but a recent electrical fire in my garage has ensured that most of them have been damaged beyond repair and it'll cost too much to replace them.   On top of that, a competitor in the USA has managed to pull the source code from my website and now offers exactly the same product at a lower cost - so really, I've got no option but to shutdown my business to save my own sanity! (I work full time too and really can't take many more of these kicks).

I have just over 1k in the business bank account and I was really hoping I could actually just pay myself a portion of the dividends owed to me with that (considering my own effrots in running the business over the last 5 years I figured it was only fair!) 

My accountant charges 500 pounds for preparing and filing accounts and has not budged on that figure since incorporation.  I'm loathe to hand over such an amount for dealing with the accounts which basically consists of less than 50 transactions for the year.

The accounts for 2020-21 will be due by August and have yet to be prepared.  Other than the dividends owed to me, the company has no debts.

Is it possible to apply to strike off the company, retain what little funds I have (in order to pay myself) and just cease all trading, while keeping expenses to a minumum?

Replies (18)

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By Jekyll and Hyde
19th Jan 2022 11:10

Have you spoken to your accountant about closing the company? What was their advice?

On what you say, the answer is quite easy, however I am loathed to give out free advice.

Thanks (4)
By williams lester accountants
19th Jan 2022 11:42

The answer would be, it depends. Speak to your accountant about closing the limited company, it may not be as easy as you imagine.

Thanks (1)
VAT
By Jason Croke
19th Jan 2022 11:52

You can dissolve the company yourself, lots of online services to choose from, one example is https://www.onlinefilings.co.uk/ and I think they charge £49 for that which includes the £10 filing fee to companies house.

Also, plenty of cheap online services to deal with annual accounts, such as https://taxwise.org.uk/limited-company-accounts/ who charge £299 for a basic service.

But...the £500 your accountant charges may seem high for the 50 or so transactions, but you are paying for the knowledge and experience of them preparing a set of accounts that are correct and give you the best outcome for tax and allow you to meet your fiduciary duties as a Director of a Ltd company. Getting paid for advice is always the best advice.

Thanks (1)
A Putey FACA
By Arthur Putey
19th Jan 2022 12:11

Hang on until the middle of next month when accountants are over the tax return season and you might get some more replies that could help you do this yourself.

Thanks (1)
Replying to Arthur Putey:
paddle steamer
By DJKL
19th Jan 2022 12:16

I thought this year it was extended a month, so March really?

Thanks (0)
Replying to DJKL:
A Putey FACA
By Arthur Putey
19th Jan 2022 13:57

Yes but I for one am not going to drag it out, I expect all mine to be in by 31 Jan.

Thanks (0)
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By FailingBusinessOwner
19th Jan 2022 12:17

Thanks, I do appreciate the work and advice (free or otherwise) that my accountant and others provide and I hope my comment about being loathed to pay my accountant for the work they do wasn't taken to heart!

From my point of view their charge forms a significant chunk of available funds, and in a year where I've so far turned over less than 1.3k in sales, that 500 for the 2020-21 filing along with any additional work results in me once again working for nothing.

I haven't yet spoken to my accountant about closing the company.

Thanks (0)
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By wingman22
19th Jan 2022 12:24

Speak to your accountant who will recomend a local IP for advice.

Thanks (0)
Replying to wingman22:
A Putey FACA
By Arthur Putey
19th Jan 2022 14:02

FFS why would they need an IP? Read the question!

PS - perhaps you were being facetious in which case tres amusant!

Thanks (1)
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
19th Jan 2022 12:34

There are no funds here to cover the cost of Liquidation, so your only real option is dissolution unless you want to pay to liquidate the company yourself.

The only real benefits of Liquidating in these circumstances would be to alleviate any stress, ensure things are wound down in an orderly manner, let the Liquidator be responsible for retaining the company's records, and potentially claim redundancy and other associated claims from the redundancy Payments office, if you were an employee of the company.

The alternative options are:

1) If you do nothing, eventually Companies House will strike the company off for non filing of returns.

2) To speed this process up you can write to the creditors, invite them to pay to liquidate the company, and give them notice that failing which you intend to file a DS01 notice at Companies House to strike the company off.

Bear in mind however that HMRC will automatically object if final returns have not been filed. The accountants may also want to object. This will leave you in limbo and waiting again for Companies House to strike it off for non filing. It might be worthwhile spending the remaining funds to pay the accountants to file the final returns so neither party objects to dissolution.

Details here:

https://www.gov.uk/strike-off-your-company-from-companies-register

Summarised here:
https://www.youtube.com/watch?v=_7APbO3Hl8M&t=67s

Thanks (1)
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By FailingBusinessOwner
19th Jan 2022 12:47

In instances where the company has no funds at all to pay for anything, filing or othewise, how would that work (the company again has no creditors)? Will it just sit in limbo until struck off?

If HMRC request final accounts or objects, and the company has no funds to pay for this service, what will happen? As a director, will I be expected to use my own funds to cover costs?

Thanks (0)
Replying to FailingBusinessOwner:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
19th Jan 2022 13:37

Yes it will sit in limbo until Companies House strikes it off.

As I said above Companies House will eventually strike it off for non filing of returns.

You are not expected to use your own funds to pay for liquidation, but if you choose to, I have stated the potential benefits above.

Good luck.

Thanks (0)
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By fawltybasil2575
19th Jan 2022 12:55

@ Failing ...(OP).

Out of courtesy to your accountant, just show him a copy of the guidance below, and ask if he is aware of any reason why you should not follow this guidance. You should receive an “OK – fine” response”.

Please then do the following ASAP (within the next 10 days is fine):-

(1) Send a letter to HMRC as follows:-

“The Corporation Tax Return for the year to xx/xx/xxxx (the last year for which a Return was submitted) showed taxable profits of £xxx. Due to a material reduction in Turnover since that accounting year-end, the taxable profits have been negligible, if any, I am very shortly to submit an application to Companies House, for the company to be struck off. I should be grateful therefore for your confirming that you will not oppose that application”.

[You may wish to SLIGHTLY elaborate, in the letter, on the circumstances which have arisen after the previous year-end]. There is no need to wait for a reply to this letter (frankly, it is very unlikely that you will receive one).

[2] On the assumption that, in implying nothing to the contrary, the Dividends owing to you WERE formally declared, close the bank account immediately (on the basis that, as your question states, the balance in the bank account is less than those declared Dividends).

[3] Submit an application to Companies House for striking off. See this link:-

https://www.gov.uk/government/publications/strike-off-a-company-from-the...

[if you are comfortable with the ONLINE process, then use it: if not so, then use paper form DS01 – if you do so, just read the notes on the form to ensure that all is in order].

[4] Move on with your life, and enjoy.

Basil.

Thanks (2)
Replying to fawltybasil2575:
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By FailingBusinessOwner
19th Jan 2022 13:20

fawltybasil2575 wrote:

[4] Move on with your life, and enjoy.

Basil.

Thank you - that's the bit I look forward to the most!

Thanks (0)
Replying to FailingBusinessOwner:
the sea otter
By memyself-eye
19th Jan 2022 13:32

Do what Basil says. The fee to companies house is only £8.00 online. Bargain!

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Replying to fawltybasil2575:
A Putey FACA
By Arthur Putey
19th Jan 2022 14:00

But HMRC might still require a CT600 for the last complete accounting period. Worth a try though.

Thanks (0)
Replying to fawltybasil2575:
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By FailingBusinessOwner
28th Jan 2022 10:30

Bank account emptied, accountant notified (they were very understanding and, as there are no outstanding liabilites, they won't object to the dissolution), HMRC letter sent today and DS01 has been accepted. I guess I just play the waiting game!

Thanks (0)
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By fawltybasil2575
19th Jan 2022 14:25

@ Arthur.

In as ever fully acknowledging your cautionary words, HMRC’s request for a CT600 is IMHO extremely unlikely if the OP sends the letter which I have recommended (I cannot recall any occasion where I, on behalf of a client company, have been unsuccessful in avoiding the need for a client company to submit a CT600 in such circumstances; and indeed the OP’s company seems to be extremely small, thus making it even less likely that HMRC would prove a thorn in one's side).

In addition, one would, in practice, request HMRC to reconsider their stance if they (i) asked for a CT600 AND (ii) objected to the striking off application. Furthermore, Companies House thankfully act independently of HMRC and would, from my experience, be unlikely to support any continuing HMRC objection to the striking off application.

Basil.

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