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bigduckontax
bigduckontax, Accountant
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Closing down a Limited Company Please can you advise re

Resolved Question:

Closing down a Limited Company

Please can you advise re the following:

2 directors hold 1 ordinary share each in a Limited Company. The NBV of the assets (computers etc) amount to £700, cash is £7k and there is a small provision for deferred tax of £160. The company has only been incurring bank charges (and therefore dormant from HMRC's perspective) and the directors now wish to close down the company.

What is the procedure to do this? At what point is Form DS01 submitted? And at what point can the directors withdraw all the remaining cash from the bank account? There are no creditors to inform. Will HMRC require a final tax return?

Many thanks
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

My immediate reaction is 'why bother?' Closing down a company is a labourious process these days as you will see if you use a search engine to research the subject. General advice indicates that you will need to employ an independent person to close a company down and that will cost. The easiest way to get rid of the unwanted organisation is just to sell it off. If you look on some of the computer mail order sites you will always find a few advertised. Before you sell distribute the surplus cash to the current shareholders by means of a dividend. Second hand computers don't yield much these days, but they could be sold, given away or just dumped. Our local tip has a container steadily filling up with such electronic items which, I understand, are sold off to the third world and caniblised for spare parts. Just leave the deferred tax provision in when you sell and the new owners can then deal with that little problem.

My advice is, in a nutshell, don't try to close it down, just sell it off.
Customer: replied 3 years ago.

Thanks Keith.


 


Under the circumstances a dividend would not be the most tax efficient strategy as the directors are in the 40% tax bracket. The only option available is to therefore close down the company and distribute the cash with no additional tax liability. What is the procedure in this instance?


 


Thanks


 


 

Expert:  bigduckontax replied 3 years ago.
Just pay off the deferred tax and then the shareholders. They will be liable to Capital Gains tax on the distribution though. You can then sell off the company, there's always a market for operating companies, and save yourself the time wasting process of a formal close down.
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