Closing down a company - Need advice & suggestions.

**malvolio** · 9 November 2011, 14:17

Originally posted by tigerinhunt View Post

Hi,

I am into a contract which ends Mid March next year. I dont want to be doing contracting afterwards. Will go permie before taking a sabbatical for rest or most of the year 2012. Have not made up mind on that bit.

I want to close my company as soon as my contract finishes. I have couple of questions:

a) When to start the closure process?

---Since it can take 1-2 months for the closure process. Should I start the process early January so by the time my contract finishes, my business is also closed and I can go on travel. I probably will have go umbrella for remainder of my contract (2.5 months). I do want to close the company (unless it is really not money/tax efficient) by the time my contract ends. Will going umbrella for 2.5 month be financially favourable and safe?

--- Or shall I start the company closure process after my contract finishes in mid-march. Only downside is that I will have to stick around until it closes down and I would want to go travel.

--- Please suggest any other alternative but cannot make the company dormant.

b) What is the most tax efficient way of withdrawing funds:

-- I can take some dividends in this financial year but there will still be some funds left in the business. I will go much over the threshold if I withdraw all funds as dividends in this financial year and I dont want to wait until 6th April to take more dividends in next financial year.

- Any tax relief?

c) I will be taking advice from my accountant who has always be great but can someone help me with company closure procedure. Any HMRC link? What should/would happen at what stage etc etc.

Many thanks in advance,

Really boring asnwer - ask your accountant. There are a couple of gotchas that may or may not apply.

But at its simplest, you have to have ensured all bills are paid and all taxes cleared up including those paid in arrears such as CT for your last trading year. Remaining monies can then be wthdrawn either as dividends or via ESC16 which gives a discount on the effective CGT due making it cheaper than divis, but doesn't always apply. HMRC have to agree that everything is in order, then you tell Companies House to close the company.

But talk to the accountant and follow his advice.

**northernladuk** · 9 November 2011, 14:22

Originally posted by malvolio View Post

But talk to the accountant and follow his advice.

WMS +1

If you get the process wrong and shut the company down before sorting out the finances you will no longer be able to access your company account and will have a fight on your hands to get it back. People thing that it is their money so they can empty it after but that is wrong. If the company as an entity ceases to exist then money becomes an issue...

Mal's answer doesn't answer any of your questions but is the correct one.

**Clare@InTouch** · 9 November 2011, 14:22

The closure process is a bit longer than 2 months as Companies House have to advertise for 3 months in the London Gazette before they will dissolve it. A lot can be done in preparation though, so there's no reason you can't leave and go off travelling before the whole process is done & dusted.

As Mal says, ESC C16 is an option, but there are certain rules to follow before it will be granted.

If you're not working at all in the next tax year, 06 April 2012 to 05 April 2013, then it may be worth delaying the closure so you can withdraw dividends that fall into that tax year. Potentially a big tax gain to be had there.

Really though - talk to your accountant.

**tigerinhunt** · 9 November 2011, 14:32

Thanks Malvolio, northernladuk, Clare@InTouch for the advice. I am already in touch with my Accountant. It just occured to me that going Umberlla for 2.5 month wont be a good idea as I will be PAYE and after withdrawing dividends from my company, I will end up paying lot of tax for those 2.5 months. Am I correct?

I wont be working for most of 2012 but then would like to be into a permi either end of 2012 or early 2013. That makes a difference to my that tax year if I withdraw dividends in next financial year. Though, I may not be working in UK. Not sure if that makes a difference.

A lot can be done in preparation though, so there's no reason you can't leave and go off travelling before the whole process is done & dusted.

Can you provide more information. What could be started in preparation so I can finish this off as soon as or after my contract finishes Mid 2012.

Thanks again.

**Greg@CapitalCity** · 9 November 2011, 14:32

Originally posted by tigerinhunt View Post

a) When to start the closure process?

I would suggest you start the process once your contract is finished, and your last invoice has been paid. Then your accountant will know for sure where your company finances stand. I don't see any need to go umbrella for a few months. There should be no issue with you going overseas - just need to ensure your accountant prepares properly for this.

Originally posted by tigerinhunt View Post

b) What is the most tax efficient way of withdrawing funds:

Take dividends out up to the higher rate earnings threshold, and then ESC C16 the rest.

Happy travelling!

**Clare@InTouch** · 9 November 2011, 14:42

Originally posted by tigerinhunt View Post

Thanks Malvolio, northernladuk, Clare@InTouch for the advice. I am already in touch with my Accountant. It just occured to me that going Umberlla for 2.5 month wont be a good idea as I will be PAYE and after withdrawing dividends from my company, I will end up paying lot of tax for those 2.5 months. Am I correct?

I wont be working for most of 2012 but then would like to be into a permi either end of 2012 or early 2013. That makes a difference to my that tax year if I withdraw dividends in next financial year. Though, I may not be working in UK. Not sure if that makes a difference.

Can you provide more information. What could be started in preparation so I can finish this off as soon as or after my contract finishes Mid 2012.

Thanks again.

It's simply a case of getting everything done as soon as possible, and signing any necessary documents before you go. This will to a certain degree depend on how much your accountant can help you, because your main aim is getting the final accounts done asap (and that relies on closing the PAYE scheme, de-registering for VAT, applying for the ESC all being done quickly). Keep in mind that your accountant will have their own workload to think about, and that January is generally known as "Month of Hell" for most of us as we deal with last minute tax returns, so you're unlikely to get a lot done then. Talk to them now so that they can plan your work and have space to do it quickly when the time comes.

Once the accounts are signed and filed you could go, making sure you leave the DS01 form and cheque with your accountant who can then submit them once all liabilities are confirmed as cleared.

**tigerinhunt** · 9 November 2011, 15:16

Thanks Clare@InTouch

Closing down a company - Need advice & suggestions.