Cessation of accounts for limited companies
When closing your limited company upon cessation of trade, there is a prescribed procedure that you must follow that includes submitting cessation accounts.
You may wish to take this route as your limited company no longer serves a purpose or the benefits of using an alternative operating structure trumps that of a Personal Service Company (PSC).
Here, exclusively for ContractorUK, Jon Munnery of the country’s largest company liquidation provider and Creditors’ Voluntary Liquidation (CVL) specialists, UK Liquidators, explains the process of submitting a final set of accounts upon voluntary company strike off.
What are cessation accounts?
Cessation accounts are the last set of accounts you will submit before closing your limited company, leading to its removal from the Companies House register.
You must continue to file statutory accounts until you have formally requested to voluntary strike off your limited company.
Your cessation accounts should cover the period from when you started trading, to the date of cessation of trade, or when the last set of statutory accounts were submitted, along with a CT600 (Company Tax Return). The cessation date is when the last invoice was raised, paid, or expense incurred.
What is the purpose of preparing cessation accounts?
Your final accounts will be used to calculate how much tax is owed to HMRC, such as VAT, PAYE, and Corporation Tax. These computations will help round up how much cash will be available to withdraw upon the closure of your business.
To close your business successfully, you must settle outstanding affairs with creditors, including your final Corporation Tax payment to HMRC. Failure to do so could block your company strike off request (DS01 form) and result in penalties or even prosecution.
Limitations to striking off a limited company
There are certain conditions your limited company must meet before filing for voluntary company strike off. If your company has carried out any of the following within the last three months of trading, it cannot apply for company strike off.
- Changed name
- Continued trading
- Engaged in activity other than that necessary to fulfil statutory requirements, conclude company affairs (end trade or settle business debts), apply for company strike off, seek professional company strike off advice or dispose of property or rights that would otherwise continue trading.
If your business is subject to insolvency proceedings, such as company liquidation, or is part of a section 895 scheme (an arrangement between company creditors or members), it cannot file for voluntary company strike off. A full list of conditions can be found in section 1004 and section 1005 of the Companies Act 2006.
What happens after cessation of trading?
Your next step as a contractor limited company director will be to address the company bank account after any outstanding payments have been made, debts have been settled and creditors have been refunded.
Note that from the date of dissolution, the company bank account will be frozen, and any remaining credit balance will be declared ‘Bona Vacantia’ and therefore belong to the crown.
Any funds left in the business should be withdrawn before a DS01 form for company strike off is submitted. But be aware -- if you hastened to close the company and failed to withdraw funds at the correct point, you will not be able to open another bank account on behalf of the business to receive money.
Last but definitely not least, you should seek professional advice from a qualified chartered accountant before withdrawing any funds from your business to avoid unexpected tax implications.