Making company dormant

[Wils]

I set up a limited company a few years ago. I never used it other than to put through a bit of work I did for a friend. Very small amount of work, about £1200 if I remember correctly. An accountant did the accounts for me that year. However, for various reasons, I have only contracted through umbrella companies since.

As such a small amount went through the company, I didn't want to pay an accountant again to make the company dormant. So for the last few years I have been carrying the balance over each year and submitting that to Companies House.

I think it's a simple thing to take the money out of the company and make it dormant. I am clueless as to how (as you might of guessed). Can anyone recomend what I should do? Is there an accountant that can do this simple task for a small sum? Or should I try and do it myself?

[Gonzo]

In your position I would dividend the remaining funds out of the company to yourself (don't forget to declare this on your tax return), then close the company.

To close the company (rather than make it dormant) I think it is simply a matter of sending form 652a to Companies House. You shouldn't need an accountant to do that.

One possible fly in the ointment is the question of whether your company has completed a tax return? You don't mention this. If no tax records have been submitted then there may be additional hurdles from HMRC to getting the company closed.

NB If there were more substantial funds in the company then my suggestion would be different - you would probably want to get the company money treated as a capital payment not income and I would suggest engaging an accountant for that.

Remember, usual disclaimer, I am not an accountant, I am not allowed to charge for giving accountancy advice, any accountancy advice taken is at the owner's risk etc etc.

[Tax Lord]

I would slightly disagree about taking the £1.2k as a dividend. I recommend that you close the company down by submitting a 652a form and take the remaining funds via capital distribution. The funds will be covered by your capital gains allowance for 2009/10.

By doing this you are guaranteed to receive the funds tax free (assuming you have no other capital gains this tax year). If you take the funds as a dividend and you are a higher rate tax payer, you will have a personal tax liability of 25% of the £1.2k.

[Gonzo]

I would slightly disagree about taking the £1.2k as a dividend. I recommend that you close the company down by submitting a 652a form and take the remaining funds via capital distribution. The funds will be covered by your capital gains allowance for 2009/10.

Fair enough, but what do you have to do to get the money treated as a capital distribution?

[PhilAtBFCA]

Dormant Company

Wils

If your company has some money in it since you stoped working with it, you may well have had interest received, you may even have put through some expenses. This means that the company was not Dormant, it just didnt have any sales. Dormant from an HMRC perspective means no transactions at all.

This means that Financial Statements need filing with HMRC and a CT600, and also with Companies House, although i understand that you may have already done this. You could do these yourself for sure.

I agree with Tax Lord about the capital distribution using what is known as the ESC16 route. Again its not difficult , the ES16 is applied for to HMRC and then if approved you can take the money as a distribution. The order that you do things is important.

But to put that into context- if you have not earned over the 40% bracket in 2008-09 and took the dividend at 31st march 09 for instance there would be no further income tax to pay anyway, so ES16 route has no benefit.

Regarding the 652a, you are right, to close down a company you submit that form with a cheque for £10. But you need to be careful about timing of this, if there is money in the bank account, this becomes crown property when you submit the 652a, you also need to have settled all liabilities with HMRC and anyone else otherwise an objection can be lodged to stop the closure. So again, technically its not complicated, and you can do it yourself, but you do need to watch out for a few different things.

Also consider PAYE and VAT registrations - final PAYE returns and VAT retruns need to be completed and you need to deregister from both.

You also need to advise HMRC that the company is ceasing to trade.


Phil

[xoggoth]

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