Contractors' Questions: Is formal liquidation for me and how much is it?

Contractor’s Question: I have a non-trading limited company with no debts that I‘m planning on winding up and having struck off the Companies House Register. My accountant has advised me that the process is very difficult and so suggests I use their cessation service, at a cost of £500. I’d like a second opinion; is his suggestion and sum reasonable?

Expert’s Answer: It sounds as if what your adviser is suggesting is a formal liquidation - if this is so, £500 would not be an excessive price. Many liquidators would charge much more.

The question is whether you need a formal liquidation. There is a simpler, less formal process by which you can distribute the company's assets to its shareholders and then request that the company be struck off from the Companies House register but nonetheless be treated for tax purposes on the same (normally more favourable) way that would apply to a formal liquidation.

However, this informal treatment is now (since 2012) available only if the company's assets do not exceed £25,000. Beyond that figure a formal liquidation is likely to be the only way of bringing the company's life to an end in a tax-efficient way.

The expert was David Whiscombe, partner at tax advisory BKL.

Tuesday 23rd February 2016