How do I close a solvent limited company?

Company dissolution, also known as voluntary strike-off, closes your company and removes its name from the Companies House register. The process can be undertaken by yourself as a director and involves winding down your business affairs over several months.

You must repay all your creditors, for example, close down your payroll scheme, pay all tax liabilities, and also make any redundancy payments to staff. To be eligible for this form of closure your company must not have traded or changed its name in the last three months.

Additionally, you must not have made any formal agreements with creditors on behalf of the business. Voluntary dissolution is inexpensive, which makes it a popular choice, but there are two key elements you need to consider before applying for strike-off.

• Is your company definitely solvent? If not, you could face scrutiny from the Insolvency Service for failing to prioritise your creditors.
• Are your business affairs complex or relatively straightforward? The formal MVL option may be more suitable if your business affairs are complex, and can offer you considerable tax benefits.

Members’ Voluntary Liquidation, or MVL, may be a more suitable way to close your solvent business if it owns high-value assets, for example, or has retained profits of £25,000 or more.

It’s administered by a licensed insolvency practitioner (IP) who oversees the distribution of company assets and retained profits to members. A key advantage of this option is that distributions are taxed as capital gains rather than income.

This means you can extract more value from your business and may even be able to reduce your tax liability further to an effective rate of 10 per cent if you’re eligible to claim Asset Disposal Relief.

You’ll need 75 per cent of your shareholders to agree to enter Members’ Voluntary Liquidation. A resolution is then passed to that effect and a licensed insolvency practitioner is appointed.

In brief, the IP invites any claims from creditors and pays them where appropriate. They sell/distribute the company’s assets and wind down the business’s affairs before removing the company from the official register.

Apart from the clear tax benefits of entering Members’ Voluntary Liquidation, if your company affairs are complex you also have the reassurance that they’re dealt with correctly by a licensed professional.

For more information on how to close your solvent limited company, please get in touch with our expert team. Company Closure offers free, same-day consultations and operates an extensive network of offices around the country.