Questions from the self-employed: How do I close my company?

It’s not the most positive article we’ve ever had to write, but we’re all about helpfulness here at My Accountant Friend. One of the questions many self-employed people find they may have to consider is “How do I close my company?” As HMRC are inevitably going to have to be involved, it’s not as straightforward as shutting down and walking away from your bank account. A good accountant (including an online accountant) can help you find your way through the end zone. 
With that in mind, we sat down with our very own Kenny Fitzgerald to find out what’s in order when it comes to closing your own company.

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What are the warning signs you’d usually look for in a business that perhaps is coming towards the end of its natural lifespan?

I think this is common sense as much as anything else. If you’re thinking about closing your company, it’s likely that the work has simply dried up or – commonly – that you’ve been offered a full-time position elsewhere and the offer is too good to refuse. Whichever it is, you need to make sure you’re closing your company for the right reasons. If there’s no money coming in and you’ve tried your best to change that then you’re probably doing the right thing. If someone has offered you something that is financially tempting, think it through and see if it works on all fronts (reasons for going into business on your own often have to do with work/life balance, so make sure you bear that in mind). That said, everything you do with a new company will be experience under your belt, so you can always launch your own business again in the future.

From a financial perspective, what do you recommend a client to take into account before they close their business? 

This will vary from company to company. If cash reserves are below £25k, the closure process is very simple and entrepreneurs relief can be claimed. If, however, it’s greater than £25k, the option to liquidate would probably be the more tax efficient option.

Is the process a simple one? 

If the company is solvent it is. As above, if we’re talking about a company with under £25k in cash, closure accounts are prepared and we submit these along with a DS01 form to Companies House (they charge £8 for this) to start the dissolution process. At My Accountant Friend, we currently charge £300+ VAT to complete the closure process and include the closure of VAT PAYE and any other items associated with closure of the company in that fee.

If a business was shutting down this month, how much longer could the owner expect to keep hearing from HMRC in relation to that business?

Once the company is fully dissolved, which takes around three months from submission of the DS01 form (assuming there are no objections made by creditors), then the company would no longer exist, so HMRC could not go after the company. That said, they may try! Theoretically, they could also go after the directors if they believe illegal actions such as fraud had occurred. As such there is no real time frame on this.

So it’s best to keep all of your documents just in case?

Yes. All company records should be kept for seven years. That’s the case whether you’re closing down or staying open, of course. It’s just a standard business requirement.

What do you recommend doing in terms of putting cash aside for the payment of any coming taxes?

Money should already be kept aside to cover any taxes up until the point of closure – unless the company has been struggling financially, of course. If the company is insolvent, administrators may need to be appointed to liquidate the company. If you use My Accountant Friend, you’ll know that you can always see what coming tax payments need to be prepared just by looking at your online dashboard.

How does My Accountant Friend take care of a client in the closing stages of their business?

We take care of the whole process and guide you through it. If a liquidator is required we can recommend someone and then we would complete the parts required by us and pass the details across to them as required.

For more tax info on setting up, running or closing your company, get in touch with My Accountant Friend. We’re the online accountants with a human face.