The Cheapest Way to Close a Limited Company

Running a small business is not easy. Sometimes it won’t go to plan, and you could be in a position where you need to close your limited company. Tough decisions will need to be made to do this correctly. 

A lack of money may be one of the contributing factors to closing your business and you may not wish to compound the problem with further costs. This might lead you to wonder what the cheapest way to close a limited company is.

The cheapest way to close a limited company is to submit a ‘Strike off a company from the register (DS01)’ form to Companies House.  This is called a voluntary strike-off and is only available to limited companies with no debts. It will cost £8 to strike off a company.

You can’t just close a limited company without going through some processes, all of which we will outline for you below.

How much to close a limited company

£8 is the cost to complete the form at Companies House when you close a limited company. However, it’s likely there will be other costs you need to consider too. Those are detailed in a moment. 

Before that though, it’s important to understand that you can only strike off your company if it:

• has not traded or sold off any stock in the last 3 months
• has not changed names in the last 3 months
• is not threatened with liquidation
• has no agreements with creditors, for example, a Company Voluntary Arrangement (CVA)

Use the Companies House service to apply to strike off a company from the Companies House register. It costs £8 to apply online, or £10 for a paper application.  

Handy Hint: Please note that on dissolution any remaining assets, property and rights will be passed to the Crown.

If a strike-off is not an option and the company is solvent, then a members’ voluntary liquidation (MVL) would be the next cheapest way to close a limited company. The costs of an MVL are wholly dependent upon a company’s specific circumstances and the work required to be done. 

If the company has debts and neither option above works for you then you can apply direct to the court by filling in a ‘winding-up petition’ form. 

How much it costs to close a limited company is wholly dependent upon a company’s specific circumstances and the work required to be done. As we have identified above there are fundamentally three ways to close a limited company.

1. Strike off (from £8)
2. Members voluntary liquidation (MVL) (from £850)
3. Compulsory liquidation (from £1,880)
4. Creditors voluntary liquidation (CVL) (from £4,800)

They all come with their own rules and costs. The rules determine which option is available and ultimately the level of work and thus the cost to close a limited company.

Below we outline the rules for each of these options above so you can see which is applicable to your situation to get a rough guide of the price but as we have stated it is wholly dependent on your specific circumstances. 

Can I just close my limited company?

No, you cannot just close a limited company. There are various steps that need to be taken to avoid complications.

If you have creditors(people the company owes money), they will need to be notified. HMRC will need to be contacted to de-register from the various taxes you are registered and settle any outstanding tax due. There are steps below on how to do this. 

If you have a dormant limited company, it can be a simple process to close your limited company. Other types of business can be more complex and whilst you may not need an accountant you may want an accountant’s guidance.  

Closing a business might just be one of the most stressful things you do.

When closing a limited company there are many steps that need to be followed to avoid the closing of a business from being any more painful and costly than need be. The individual circumstances around your situation will determine what is right for you and any creditors of the business.

This will also drive what the legal requirements are to close your business.  

Whilst you may choose not to use an accountant to close your business you do need to think about the expertise and knowledge, they will bring with them.

Getting this wrong could prove costly from a financial and time point of view.  This will be a stressful time for you.  Do you need to compound that by trying to learn the rules and nuances of closing a limited company?

There are several things to consider, all of which we’ve outlined for you below to help you stay compliant and ask the right questions.

Easiest way to close a limited company

As we have outlined above the easiest way to close a limited company is to file a DS01 with Companies House.

We have provided some further detailed steps and examples for closing a limited company below. 

• You must cancel your VAT registration if you are registered.
• You need to close your PAYE scheme and send final payroll reports to HMRC if you stop employing staff.
• You will need to notify your pension provider if you stop employing staff.
• You must call the CIS helpline as soon as possible if you’re registered and stop trading as a contractor or subcontractor.

The legal term for this process is dissolution or striking off. By doing this, the company ceases to exist, and you will not need to send Companies House any further information like your annual accounts and confirmation statement.

For a voluntary dissolution to begin, the company must meet certain conditions. You can apply to strike off your company, but only if it:

• has not traded or changed names in the last 3 months
• is not threatened with liquidation
• has no agreements with creditors, such as a Company Voluntary Arrangement (CVA)

If your company does not meet these conditions, you’ll have to voluntarily liquidate your company instead.

You must announce your plans to all interested parties and HM Revenue and Customs (HMRC). Employees (if any) must be treated according to the company rules, business assets disposed of, and accounts emptied. 

If you do not do this, any assets of a dissolved company will be become property of the Crown because it does not have a legal owner.

Handy Hint: The company’s bank account will be frozen from the date of dissolution. Any credit balance in the account and other assets will pass to the Crown – you’ll have to restore the company to get anything back.

If your company has traded, but meets the conditions, you must send your final statutory accounts and a Company Tax Return to HMRC, stating that these are the final trading accounts and that the company will soon be dissolved.

You do not have to file final accounts with Companies House.

When Companies House receive your application, they will confirm that it has been completed correctly and publish it in the Gazette. 

If there are no objections to strike off, the company will be struck off the register once the 2 months mentioned in the notice has passed. A second notice will be published in the Gazette, which means the company will not legally exist anymore (it will have been ‘dissolved’). 

If you owe late filing penalties to Companies House, they will usually accept the dissolution and allow the company to close without paying the fine.

Can you close a limited company without paying tax?

There are many steps required to close your business depending on the type of business you operate and the taxes you are registered with, you may be required to deal with HMRC for VAT, PAYE, Income Tax, National Insurance and Corporation Tax.

Each of these departments acts independently so you will need to contact each one separately.  Failing to close your business with HMRC properly can lead to fines, penalties, and an impact on your business or personal credit rating.

It is vital to inform HMRC of a closing company. If you do not inform HMRC that you are closing a company, they will expect you to file tax returns and other regulatory returns.  HMRC can also object to the request to close a limited company at Companies House which can stop the strike off. 

It makes sense to inform HMRC of your intention to close a company to avoid potential fines, penalties, and disputes and for the process to go as quickly and smoothly as possible.

There are various departments spanning HMRC and whom you need to contact will depend on the taxes you are registered.

• Cancelling your VAT registration
• Cancelling your PAYE registration
• Cancelling your CIS registration
• Cancelling your self-employment

Closing a limited company with debts

If you want to close a limited company with debts to HMRC, it will be tricky as you cannot dissolve a company with debts. You can only dissolve a business if it is solvent. If you cannot repay your HMRC debt the only route to company closure is through a formal liquidation. More detailed guidance is provided on this in a moment.

Do I have to pay corporation tax if I close my limited company?

When closing a limited company, you will need to prepare a final set of accounts so you can create your final corporation tax return. 

If you wish to close your limited company, you will need to settle the outstanding corporation tax with HMRC before writing to them to inform them that you wish to close the company.

If you attempt to strike off a limited company with corporation tax debt HMRC will reject the application when it is advertised in the Gazette.

If you have corporation tax debt and you have not been in contact with HMRC to resolve the matter it is highly unlikely they will allow the limited company to be struck off and will continue to chase for the outstanding corporation tax debt.

If the corporation tax debt is beyond the capabilities of the business to pay then you may need to speak to an Insolvency Practitioner to see if placing the company into voluntary liquidation, known as creditors’ voluntary liquidation (CVL) is the best way forward. 

A creditor such as HMRC will take legal proceedings to have a company wound up, known as a compulsory liquidation when a company fails to pay outstanding taxes and is unable to reach an agreement.

FAQs on the cheapest way to close limited companies

Closing a limited company with debts

When closing a limited company with debts you usually need to have the agreement of your company’s directors, shareholders, and creditors to close a limited company with debts. 

When your company is insolvent, the interests of your creditors legally come before those of directors or shareholders. You can get professional advice from an insolvency practitioner.

When closing a business there are many steps that need to be followed to avoid the closing of a business from being any more painful and costly than need be.

The individual circumstances around your situation will determine what is right for you and any creditors of the business.  This will also drive what the legal requirements are to close your business. 

When the company is insolvent, the interests of the people your company owes money to (its creditors) legally come before those of the directors or shareholders.

How you close your company depends on your circumstances.

Your company might be forced into compulsory liquidation if you don’t pay creditors.

You may be able to avoid liquidation by applying for a Company Voluntary Arrangement.

How long does it take to close a limited company?

How long is takes to close a limited company will depend on the way in which you are closing your limited company, how organised you are, whether you have followed correctly all the steps mentioned above and whether you are seeking professional help to close your limited company.

If you have applied to strike off your limited company, you’ll get a letter from Companies House to let you know if you’ve filled in the form correctly. If you have, your request for the company to be struck off will be published as a notice in The Gazette.

If there are no objections to strike off, the company will be struck off the register once the 2 months mentioned in the notice has passed.

A second notice will be published in the Gazette, which means the company will not legally exist anymore (it will have been ‘dissolved’).

It will take approximately 3 months to close a limited company via a strike-off.

If you are closing a limited company via a Members Voluntary Liquidation, then assuming that all liabilities have been settled prior to the appointment of an IP and all required information provided, distribution of company assets to shareholders can take place in as soon as 21 days.

21 days is the minimum time given for creditors to submit claims following liquidation.

The time estimated for case closure and subsequent dissolution is more uncertain, however, as it is dependent upon HMRC clearance.

As a guide, an estimated 3 months from the appointment of an Insolvency Practitioner should be expected.

How to close a limited company that never traded?

So, we have been through various scenarios looking at how you can close a limited company with debt. Now we are going to focus on those occasions where you wish to close a limited company that has never traded.

A limited company can generally be removed from the registrar of companies at Companies House when it has not traded in the following way:

Voluntary strike-off and dissolution

You can close your limited company by getting it ‘struck off’ the Companies Register. This is also known as ‘dissolving’ your company.

You can only strike off your company if it:

• has not traded or sold off any stock in the last 3 months
• has not changed names in the last 3 months
• is not threatened with liquidation
• has no agreements with creditors, for example, a Company Voluntary Arrangement (CVA)

How do I close a limited company with no debt?

You may choose members’ voluntary liquidation if your company is ‘solvent’ (can pay its debts) and one of the following applies:

• you want to retire
• you want to step down from the family business and nobody else wants to run it
• you do not want to run the business any more

To pass a resolution for members’ voluntary liquidation, you must:

• make a ‘Declaration of solvency’ – English and Welsh companies
• ask the Accountant in Bankruptcy for form 4.25 (Scot) – Scottish companies

You’ll need to review the company’s assets and liabilities just before making the declaration.

Make a declaration of solvency

Write a statement saying that the directors have assessed the company and believe it can pay its debts, with interest at the official rate. You should also include:

• the name and address of the company
• the names and addresses of the company’s directors
• how long it will take the company to pay its debts – this must be no longer than 12 months from when the company’s liquidated

You also need to include the statement of the company’s assets and liabilities.

After you have signed the declaration or form

There are 5 further steps to members’ voluntary liquidation.

1. Sign the declaration or form 4.25 (Scot) – it must be signed by the majority of directors in front of a solicitor or ‘notary public’.

• Call a general meeting with shareholders no more than 5 weeks later and pass a resolution for voluntary winding up.

• At the meeting appoint an authorised insolvency practitioner as a liquidator who will take charge of winding up the company. You can find an insolvency practitioner online.

• Advertise the resolution in The Gazette within 14 days.

• Send your signed declaration to Companies House or form 4.25 (Scot) to the Accountant in Bankruptcy (for Scottish companies) within 15 days of passing the resolution.

When the liquidator is appointed, they take control of the company. Your responsibilities as a director will change.

Conclusion

Closing a business is a lot harder than starting a business, both from an emotional and practical point of view. Once you have made the difficult decision to close your business you will probably want the experience to be over as quickly as possible with the minimum of fuss and pain.

Ultimately you can try to navigate your way through this on your own but as we have highlighted above there are many steps and considerations to make.

You will probably have enough on your plate so whilst you can close your limited company in the cheapest way without the help of an insolvency practitioner or accountant, we would ask you to think about the financial and emotional consequences of doing so.

An insolvency practitioner or accountant will use their experience of having been through this process many times before. They are detached from the situation emotionally so will help you make rational decisions.

Getting the steps wrong can take more time and cost more money.  They will help you navigate this process to complete it as efficiently as possible.  There is a financial cost to this service but there is also a cost to you of trying to go it alone.

More small business guides…

• Factors that could make HMRC investigate your business
• How much an accountant will cost for a small business

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