Close my Independent School
Signs of financial distress in independent schools are on the rise, with staff salary pressures, falling pupil intakes and increases in estate and operating costs all taking their toll. That’s against a backdrop of long-term high energy costs that are continuing to plague the sector.
However, the one change that has pushed many independent schools to the brink is the imposition of the 20% VAT charge on school fees. That has left many schools with difficult decisions to make:
- Should they pass on the cost rises to parents, leading to a likely fall in pupil numbers, or
- Sacrifice an already thin bottom line to maintain pupil numbers?
In the face of these challenges, more than 50 UK private schools have either closed or announced plans to close since January 2025. And if you are running out of options, liquidation can represent an effective solution.
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How do I liquidate my independent school?
If your private school is financially past the point of no return, or you simply no longer want to run it, liquidation is a formal procedure you can use to draw a line under it and move on.
Liquidate my insolvent independent school: Creditors’ Voluntary Liquidation (CVL)
If your private school cannot pay its debts when they are due and/or its liabilities exceed its assets, you can close it using a Creditors’ Voluntary Liquidation.
You must appoint a licensed Insolvency Practitioner to wind up the school on your behalf. They will sell its assets and use the proceeds to repay as much debt as possible. Any debt the school cannot pay will usually be written off and will not pass to the directors or shareholders.
By acting quickly and liquidating your insolvent school voluntarily, you reduce the risk of misconduct and wrongdoing that could otherwise lead to penalties. You may also be eligible to claim company director’s redundancy pay.
Liquidate my solvent independent school: Members’ Voluntary Liquidation (MVL)
On the other hand, if your school can pay its debts, you can close it voluntarily using a formal procedure called a Members’ Voluntary Liquidation. Again, you’ll need to appoint an Insolvency Practitioner (IP) to wind up the school on your behalf. They will sell the school’s assets, use the proceeds to repay its debts and distribute the remaining profits among the shareholders.
An MVL is a tax-efficient closure method for schools with retained profits (cash and assets) of more than £25,000. That’s because all distributable profits are treated as capital rather than income, and you may be eligible for Business Asset Disposal Relief to reduce the rate of Capital Gains Tax you pay.
How do I close my independent school via Company Strike Off?
Another option, if your independent school is solvent, is to close it using an informal procedure called Voluntary Strike Off. In this case, you can apply online and administer the process yourself, so there’s no liquidator’s fee to pay.
Although the low costs can be attractive, Strike Off is usually less tax-efficient than a Members’ Voluntary Liquidation if your school has more than £25,000 in retained profits. You must also take careful steps to prepare the school for closure and ensure that it’s solvent.
If you want to close an independent school but are unsure how to proceed, we can discuss your circumstances, talk you through your options and implement the closure procedure on your behalf. We also work to protect your interests throughout.
Please get in touch for a free, same-day telephone consultation or arrange a meeting at one of our offices throughout the UK.
25,000+ Company Directors Supported – Partner Led Service
At Company Closure we have a nationwide team of licensed insolvency practitioners and company closure experts here to help you understand your options. Whether your company is solvent or insolvent, there is a closure method out there to suit you.
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