Tardy directors now have only four months to save their company from being struck-off, says Rebecca Cave.
If directors are late in filing their company accounts, and don’t reply to warnings from Companies House, their company can be struck-off the Companies House register and cease to exist. This procedure is set out in Companies Act 2006, s 1000.
That requires the Companies Registrar to send at least two formal letters to the company, and if no reply is received to either letter, publish a notice in the Gazette to inform the world that the company will be struck off three months after the date of that notice.
It used to take around six months to complete the legal steps in CA 2006, s 1000, but now it can take only four months. This is because the periods between sending the formal warning letters have been reduced from a month to 14 days, and the notice period in the Gazette has been reduced from three months to two. These changes were made by the Small Business, Enterprise and Employment Act 2015, s 103 with effect from 10 October 2015.
Companies House appears to have changed its internal practices to start the process of removing a company from the register much sooner than was otherwise the case. Accountants have been told that if Companies House doesn’t receive a response from a company to three reminders sent over a two month period, it will commence proceedings to strike-off the company.
A Ltd has a year end of 31 March 2015 so it should have filed its accounts by 31 December 2015. Companies House sent three reminders to A Ltd in January and February 2016 but received no reply. The Gazette notice to strike-off A Ltd was issued on 2 March 2016, with a commencement date for the notice as: 8 March 2016.
It has been common practice for HMRC to object to the Gazette notice and prevent the company from being struck-off if tax was due, or was likely to be due. This is necessary because HMRC can’t recover any tax due from the company once it has been struck-off, as then it has ceased to exist (HMRC Insolvency Manual INS5104).
HMRC’s objections to a striking-off can be frustrating for a director who is genuinely trying to close down a failed company – as explained in Any Answers. But the HMRC procedure is needed to prevent the unscrupulous from trading through a UK company then allowing that company be struck off by ignoring Company House letters.
However, following the acceleration of the striking-off procedure it seems that HMRC may not have enough time to issue objections before a company is struck-off. I have received anecdotal stories about companies being struck off where there is tax to pay. Have you seen this happen recently?
About Rebecca Cave
Consulting tax editor for Accountingweb.co.uk. I also co-author several annual tax books for Bloomsbury Professional and write newsletters for other publishers.