Do I Need an Accountant to Close My Business?

Running a small business will be one of the hardest things you will do. Sometimes it doesn’t always go to plan, and you might end up in the situation where you need to close your business. 

Unfortunately, it’s not as simple as just calling HMRC and telling them your business is closing. There will be many decisions to be made and steps followed in sequence to do it correctly, so you don’t incur any penalties. 

Do I need an accountant to close my business? You don’t need an accountant to close your business. However, some businesses can be complex so whilst you may not need an accountant to close your business, you may want an accountant’s guidance. 

For example, closing a dormant limited company can be a simple process, but other business types are not so easy to close without the possible support of an accountant. In fact, trying to close your business by yourself might just be one of the most stressful things you do.

Why use an accountant to close your business

A lack of money may be one of the contributing factors to closing a business and you may not wish to compound the problem with further costs. This may lead you to asking yourself ‘do I need an accountant to close my business?’.

When closing a business there are many steps that need to be followed to avoid the closing of a business being anymore 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 bring with them. Getting this wrong could prove costly from a financial and time point of view – the last thing you want to do is trigger an HMRC investigation.

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 business?

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.

Handy Hint: Here’s how much it costs to employ an accountant to help your small limited company.

Closing down a small business in the UK

As we have mentioned there are various tasks that require to be carried out when closing down a small business. The type of business you operate will determine what those tasks look like.  Below are a few items that will be the same regardless of the business type.

We have then provided some further detailed steps and examples for a sole trader and a limited company.

• 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.

Closing down a sole trader business

You must tell HM Revenue and Customs (HMRC) if you’ve stopped trading as a sole trader.

You’ll also need to send a final tax return.

• Tell HMRC you’re stopping self-employment

You must send a Self-Assessment tax return before the deadline if you’re stopping trading as a sole trader.

When you send the return, you’ll need to:

• work out your trading income.
• add up your allowable expenses – this may include some of the costs involved with closing your business, for example phone, internet, and postage costs of letting people know.
• calculate your capital allowances, including any balancing charges if you’ve sold business equipment or machinery.
• work out if you owe Capital Gains Tax on any assets you’ve sold or ‘disposed’ of
• calculate your final profit or loss.

You should consider hiring a professional (for example an accountant) if you need help with your final tax return.

Closing a limited company

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.

How do I inform HMRC of a closing company?

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 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, disputes and for the process to go as quickly and smoothly as possible.

There are various departments spanning HMRC and who 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

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 down 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 down the company.

If you have an outstanding corporation tax return and payment due, you will not be able to close your company with Companies House.  HMRC will object the application as they are a creditor of your business.

What is the cheapest way to close a limited company?

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 – read the full guide here.

Use this 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.  

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

What to do with assets when closing a business

When closing a business, it will make sense to realise any value the assets have to maximise the funds to distribute to shareholders and owners. If the company has assets such as stock, property, or investments they should be disposed to generate cash.

There may not be a ready market for the assets that you are disposing, or you may wish to simply transfer the assets to the owners. When you sell or ‘dispose of’ something you claimed capital allowances on, include the value in your calculations for the accounting period you sell it in.

You dispose of an asset if you:

• sell it.
• give it away as a gift or transferring it to someone else.
• swap it for something else.
• get compensation for it – like an insurance payout if it’s been lost or destroyed.
• keep it, but no longer use it for your business.
• start to use it outside your business.

If a profit is made on the disposal, then capital gains tax may need to be accounted (balancing charge). Likewise, if a loss is made on disposal, then this creates a balancing charge.

In the year you close your business, enter a balancing charge or a balancing allowance on your tax return instead of claiming capital allowances.

Handy Hint: Knowing when your year end is will often confuse small business owners. Here’s how you find out.

Frequently asked questions about needing an accountant to close my business

Can my accountant close my limited company?

Your accountant can support you in closing your limited company by preparing final accountants and paperwork. But an accountant can’t go off and independently close your limited company without your approval. 

Can I just close my business? 

No, you can’t simply just close a business. To close a business, there are various steps that need to be taken to avoid complications. For example, if you have creditors, they will need to be notified.  

As a sole trader you will be personally responsible for those debts. HMRC will need to be contacted to de-register from the various taxes you are registered.  

Handy Hint: Here’s our latest guide on how you can close a company with debts, whilst keeping the right side of the law.

How do I close my business with HMRC? 

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

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

Does a small business have to have an accountant? 

A small business does not have to have an accountant by law, but you need to consider the complexity of your business, the filing and tax requirements. 

An accountant trains for many years to provide a service to small business owners and completes ongoing continual professional development. How will you manage the various rules and regulations attached to running a limited company for example without that knowledge, skill and experience.

Do you need an accountant, or can you do it yourself? 

You do not need to have an accountant and you can do it yourself, but you have to question why you would want to.  Accountants and bookkeepers spend many years gaining the knowledge and experience to complete the tasks they do for small business owners. 

On top of that they complete continual professional development every year to ensure that they keep their skills relevant and up to date.

Do you need an accountant? No.  

Should you do it yourself? No.

Conclusion

Closing a business without using an accountant 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 business without the help of an accountant, we would ask you to think about the financial and emotional consequences of doing so.

An 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.