Closing a limited company can be a complex process, but it can be done efficiently and without paying unnecessary taxes if you know the right steps to take.
In this blog post, we’ll explore the most tax-efficient ways to close a limited company without incurring additional tax liability.
We’ll also discuss the differences between a Voluntary Strike Off and a Members’ Voluntary Liquidation to help you make the best decision for your business.
So, read on to learn more about your options and the process of closing your company.
(Check out this link if you want our help to dissolve a limited company in the UK).
What’s The Most Tax-Efficient Way to Close a Limited Company Without Paying Tax?
The most tax-efficient way to close a limited company without paying tax depends on the specific circumstances of your business.
Two common methods are the Voluntary Strike Off and the Members’ Voluntary Liquidation.
Each method has its own set of rules and requirements, and the best choice will depend on the size and financial situation of your company. Let’s take a closer look at each option.
What is a Voluntary Strike Off?
A Voluntary Strike Off is a relatively simple and cost-effective method of closing a limited company.
To initiate the process, you need to submit a DS01 form to Companies House.
However, certain conditions must be met before you can apply for a Voluntary Strike Off:
- The company must not have traded or sold any stock in the last three months.
- The company must not have changed its name in the last three months.
- The company must not be involved in any legal proceedings.
If your company meets these criteria, you may be eligible for a Voluntary Strike Off.
It is important to note that any remaining assets in the company will be distributed among the shareholders and may be subject to Capital Gains Tax.
NOTE – You might find this post useful discussing closing a ltd company that is in debt.
What is a Members’ Voluntary Liquidation?
A Members’ Voluntary Liquidation (MVL) is another option for closing a limited company tax-efficiently.
This process involves appointing a licensed insolvency practitioner to liquidate the company’s assets and settle any outstanding debts.
Unlike a Voluntary Strike Off, an MVL is suitable for solvent companies with significant assets.
One of the key benefits of an MVL is that it allows company shareholders to take advantage of Business Asset Disposal Relief (previously known as Entrepreneurs’ Relief).
This relief reduces the Capital Gains Tax rate to 10% on qualifying assets, potentially saving you a significant amount in taxes.
To initiate an MVL, you will need to:
- Hold a general meeting with shareholders and pass a resolution to liquidate the company.
- Appoint a licensed insolvency practitioner as the liquidator.
- Ensure that the company’s assets are valued and distributed to the shareholders.
NOTE – You might find this article useful. It looks at if you can dissolve a company that has a bounce-back loan.
Final Notes On Close a Limited Company Without Paying Tax
Deciding whether to close your limited company using a Voluntary Strike Off or a Members’ Voluntary Liquidation depends on your company’s financial situation and specific circumstances.
Both options can be tax-efficient when used correctly, so it’s essential to consult with a professional accountant or tax advisor to determine the best course of action for your business.
If you need expert guidance on closing your limited company tax-efficiently, don’t hesitate to reach out to our team of experienced professionals.
We can help you navigate the complexities of company closure and ensure that you make the most tax-efficient decision for your unique situation.
Contact us today to schedule a consultation and take the first step towards a successful and financially secure company closure.