You may decide you need to cease trading as a Limited Company for many reasons. Perhaps it is no longer the most tax efficient way for you to trade, perhaps you are retiring or going into employment elsewhere. Or perhaps things haven’t been going as you would have hoped and you feel it is time to close the company down.

Whatever the reason, the company must satisfy the following criteria to be eligible for voluntary dissolution. This is set out in section 1004 and 1005 of the Companies Act 2006: 

• The company has not changed its name in the last three months
• The company has not traded, carried on any other business activity, or sold off any of its assets in the last three months
• The company is not threatened with liquidation
• The company has no ongoing payment agreements in place with its creditors – for example, a Company Voluntary Arrangement (CVA) 

If the company satisfies all the above criteria, the directors can approve the action by passing a board resolution. This can be done at a board meeting or by a written board resolution.

If there are two directors, both must agree. And for companies with more than two directors, more than 50% must approve the resolution.

There is a list of steps to follow before sending the forms to Companies House. 

These are:

1.Cease trading

At least three months before applying to strike off the company.  If any business activity occurs in the 3 months before you apply, Companies House could reject the application.

2. Notify all interested parties 

You must announce your plan to strike off the company to anyone likely to be affected such as shareholders, employees, bank, customers and supplies and HMRC.

3. Deal with business assets

It’s important to deal with all business assets (equipment, stock, cash etc) before dissolving your company. Otherwise, any assets still held in the company name at the time of dissolution will become ‘bona vacantia’ (ownerless property) and automatically pass to the Crown. 

If you take any of the assets or sale proceeds for yourself, you may be liable to pay Capital Gains Tax. However, if the proceeds or value of the assets amount to more than £25,000, HMRC will treat the distribution as income, which will be liable to Income Tax instead. 

In either case, you should check whether or not you are eligible for Business Asset Disposal Relief. This may reduce the amount of tax you need to pay on the proceeds you receive.

4. Pay employees

If you have employees, you must adhere to the redundancy rules and pay their final wages, including any holiday pay and benefits. Some or all of your staff may also be entitled to a statutory redundancy payment. 

Tell HMRC you have ceased being an employer by submitting a final Full Payment Submission (FPS) or Employer Payment Summary (EPS) after the last payroll run and then close your PAYE scheme. 

5. Settle all outstanding bills and debt

You cannot dissolve a company if it has any debt at the time of application. If you attempt to do so, your creditors can object to the company being struck off, resulting in Companies House halting the process.

Therefore, you must ensure that all business debts in your company name are settled in full before applying for dissolution. 

6. Prepare final accounts and tax returns 

Deliver your final annual accounts and Company Tax Return to HMRC. You must state that it’s the final set of trading accounts and that you are dissolving the company. You don’t have to file these accounts with Companies House.

7.Deregister for VAT

If the company is registered for VAT, you’ll also need to cancel your registration, complete a final return and pay over the final liability. 

8. Close company bank accounts

Close all accounts before applying to strike off. This is very important as any company bank accounts that remain open will be frozen from the date of dissolution.

Once Companies House receives the form, they will register the information on the company’s public record, and publish a statutory notice in one of the following Gazettes:

• The London Gazette – if your company is incorporated in England and Wales
• The Edinburgh Gazette – if your company is incorporated in Scotland
• The Belfast Gazette – if your company is incorporated in Northern Ireland

The strike-off notice will appear in The Gazette at least two months which gives any party the opportunity to object. 

If there are no objections in this time, the Company will then be struck off.

If you want to retain the Company name at Companies House and keep the company as dormant, you can do as long as:

• The company is not carrying out any business activities
• The company is no longer trading
• The company is no longer receiving any income
• It continues to be registered at the Companies House

You will still have to file an Annual Confirmation Statement though (which costs £34 a year) and file dormant accounts. With this option though, at any point in the future you can start to trade through the company again should you wish to do so.