Closing a business could be a hard decision. But sometimes, the situation demands that we deal with tough times in life to move on and start afresh. Dissolving your dream company could be hard, too. We know you built your business from scratch. You put in a lot of blood, sweat, and tears. So, dissolving that business could sound hurtful and very nostalgic to you.
Still, if your situation matches these “7 Signs of Why and When You Should Close Your Company,” you should consider dissolution.
Today we will explore 10 easier steps on how to dissolve a company in the UK. So, stay with us till the end and learn how you can easily do this important task.
Getting Ready for the Winding up a UK Business
Before doing anything, you need to plan how and when you will close your business. There are many moving parts in a business, especially if more than one decision-maker or stakeholder needs to be consulted, which can take time to plan and finalize. Your business plan is a good place to start to figure out everything you need to think about.
Start by making a schedule of when you need to contact people or finish the paperwork. Make a list and put due dates or time limits next to each task, such as:
- Talk to an accountant.
- Collect past-due payments.
- Close all customer accounts.
- Contact the suppliers.
- Contact the landlord.
- Notify the insurance company.
- Consult with employees.
- Get in touch with business banking.
This is not an exhaustive list because what you need to do will depend on how your business operates. Do not forget to add up any costs, like rent or electricity, that will come up between now and when you stop trading so you have enough money to pay the bills. Consult with an expert to understand the requirements in more detail.
Required Forms to Dissolve a UK Company
To dissolve a company in the UK, there are a few pieces of information to gather. Those can vary depending on the business’s legal structure. Let’s have a look:
Form DSO1: Dissolution of Limited Companies
By sending in Form DSO1, you can dissolve a company. A majority of the directors must sign the form. This form is submitted to Companies House, but a copy must be sent to all “notifiable parties” within 7 days of the application for dissolution. A creditor, employee, shareholder, or trustee of an employee pension fund is an example of a notifiable party. If you violate these rules, you may be fined or prosecuted.
When you have submitted Form DSO1, a notice announcing your decision to dissolve is placed in the official public record (the Gazette).
If no one objects, your company will be dissolved three months from the date of this notice if no one says anything. Following that, the Gazette will issue a final notice confirming the dissolution.
The cost of dissolving a company is £10.
You must keep any records and documents relating to the business for seven years after the company has been dissolved.
PM134200 – Dissolution of Partnerships
A particular group of people can form a relationship called a partnership. Any change in those individuals terminates the partnership and may result in the formation of another, but in some cases, the partnership may be terminated without the formation of a new one. Each case is different, and the facts will determine whether or not a new partnership forms.
A partnership can also end if the partners agree to do so if one of them dies or goes bankrupt, if the project it was set up to do is done, or if one partner gives notice to the other partners that they want to end the partnership.
Sections 32-35 of the Partnership Act of 1890 contain legislation governing the dissolution of a partnership.
When a partnership changes, the firm’s basis period usually changes, too.
Sole Trader Dissolution
If you are ceasing to trade as a sole trader or leaving a business partnership, you must file a self-assessment tax return before the deadline.
When sending the return, you must:
- Calculate your trading income.
- Add up your allowable expenses, including some of the costs associated with shutting down your business, such as phone, internet, and postage costs for informing people.
- Calculate your capital allowances, considering any balancing charges if you’ve sold any business equipment or machinery.
- Determine whether or not you owe capital gains tax on any assets you’ve sold or ‘disposed’ of.
- Determine your final profit or loss.
How Do I Let HMRC Know My Business Is Closed?
To inform HMRC (His Majesty’s Revenue and Customs) that your business is closed, you can follow these simple steps:
Closure of a Limited Company
If your business is not active, trading, or receiving income, you can put it in a ‘dormant’ state. However, you must still send your annual accounts and confirmation statement because you are registered with Companies House.
If a limited company continues to trade even when it is technically insolvent, the directors can become personally responsible and have to use their own money to contribute to the company’s assets.
There are also rules to prevent directors from favoring certain creditors or giving away or selling assets at a lower value. These rules can be overturned to ensure fair treatment for all creditors.
Once you have made the necessary decisions and preparations, you need to announce the closure of your business and inform the relevant parties. The required steps are:
- Tell HMRC that you are closing your business and are no longer doing business.
- If you are an employer, you need to let your workers know about the closing and take the right steps.
- Talk to your insurance company about your policies because just canceling them could leave you open to claims even after your business is gone. Some professional groups require you to keep your professional indemnity insurance for a while after you stop trading.
- If you are registered with the Construction Industry Scheme (CIS), you must let HMRC know if you want to stop working as a contractor or subcontractor.
- Send in your final statutory accounts and your company’s tax return.
- Make sure you settle your last tax payment, which includes any money you owe for business taxes, value-added tax (VAT), and National Insurance contributions.
- Cancel your registration for VAT.
Getting Out of Being a Sole Trader
- Tell HMRC by April 5, the end of the tax year, that you are no longer in business. You can do that online.
- Before the deadline, submit your final self-assessment tax return. Income, expenses, capital allowance, Capital gains tax, and final profit or loss must all be detailed. If you have an accountant, they can assist you with this.
- Pay your final tax bill, which includes any applicable tax, VAT, and National Insurance.
- If necessary, cancel your VAT registration.
Remember that, as a sole proprietor, you are personally liable for your company’s debts.
Ending a Partnership
- Tell HMRC that you are closing your business and will no longer be doing business.
- Send your last tax return for self-assessment before the deadline. You must list your income, expenses, capital allowance, any Capital Gains Tax, and your final profit or loss. If you have a financial advisor, they can help you with this.
- The chosen partner must send both the final tax return for the partnership and their own self-assessment tax return.
- Pay your final tax bill, which includes any taxes, VAT, and National Insurance.
- Cancel your VAT registration if you need to.
10 Ultimate Steps on How to Close a Limited Company in the UK
If there are no debts, you can dissolve a company by following the steps below.
Step 1: Notify All the Associates
You must set a date for the company to cease operations and notify anyone with a stake in it (other directors, bank, etc.). You will also need to notify all shareholders and set a date.
Step 2: Complete Companies House Form AA01
If you choose a date that differs from your normal accounting date, you must complete a Companies House form called Form AA01. You must sign it and send it to Companies House (a copy must also be sent to HMRC).
Step 3: Notify HMRC About Agreed-Upon Closure Date
Once the agreed-upon closure date has passed, notify HMRC that you have ceased trading and have no additional taxable income. Please also inform them that the final accounts will be sent promptly.
Step 4: Notify HMRC About CIS Theme
If your company employs people or is registered with the CIS scheme, you must notify HMRC that both schemes are no longer necessary.
Step 5: Prepare a Final VAT Return
If your company is VAT-registered, you must de-register by completing VAT Form 7 and preparing a final VAT return.
Step 6: Register with HMRC About Sole Trader Trading
If you intend to continue trading as a sole trader, you must register with HMRC as such.
Step 7: Notify HMRC About No Further Tax Returns
If you are not planning to be a sole trader or partner and are returning to work/retiring, you must notify HMRC that no further tax returns will be required after your final one.
Step 8: Submit Final Accounts
Prepare and submit your final accounts and corporation tax return to HMRC and Companies House.
Step 9: File Form DS01
Wait for three months after the closing date and file Form DS01 to have your company struck off the register. The DS01 can be completed online by clicking here.
Step 10: Companies House Will Publish Gazette
Companies House will publish these specifics in the Gazette and, assuming no objections are raised, will dissolve your company three months after the publication of these specifics. After completing this, the business can be regarded as being shut down entirely.
How to Close a Company Online
You can close a public limited company, a private limited company, or a limited liability partnership (LLP) online by using the “Apply to strike off and dissolve a company” service.
For companies with more than one director, the application must have the signatures of more than half of those directors.
It will cost you £8, and you will need:
- To log in to or make a Companies House account, which differs from a WebFiling account.
- The number of the company.
- Company’s authentication code.
- An email address for each applicant signer.
- To pay through a Companies House account, a credit or debit card, or both.
- Following submission, you can log in to this service and download a copy of your application.
Click here to start the process. Please note that the price could change.
The Cheapest Way to Close a Limited Company
Company dissolution, also known as voluntary strike-off, is the quickest and cheapest way to close a solvent limited company. This method works best for businesses that never made much money or did not have many physical assets. It works well for businesses that are no longer in operation and are not likely to be used again.
How to Close a Company on Companies House
The business can’t have traded, changed its name, or sold any property in the three months before the application for dissolution, and there can’t be any ongoing legal action against the company.
Form DS01 and the required fee are sent to Companies House, and the directors must:
- Stop the payroll.
- Send in all statutory returns and accounts that are still due.
- Pay any taxes that are still owed.
- Sell or move assets out of company ownership.
- Tell creditors that you are going out of business.
- Shut down the business’s bank accounts.
Once Companies House has approved the application, a notice will be put in the Gazette. If none of the company’s creditors object, the name will be taken off the register.
How Business Globalizer Can Help You
If you are facing problems with dissolving your UK company, Business Globalizer can help you with that. Now you may ask, “How can Business Globalizer help me?”
Well, with confidence, we can inform you that Business Globalizer has a dedicated service for UK company dissolution. We have successfully helped numerous people with dissolution services.
Final Words
Well, we have come to the end of our blog. As promised, we explored the easier steps on how to close a company in the UK. Hope you have gotten all the answers you were looking for. If you have more questions and are still confused, please contact us. Our experts are always here with premium consulting to walk you through the process and can even do the entire dissolution for you.
And we can also help you start afresh with all the exciting packages that are also affordable.
