Closing Down Limited Company and Moving

[pmortl]

Hi, I have a limited company which i used for selling sweets. The company has been incorporated for literally just over 1 year now. Things didn't go well and basically we have ended up losing money (our own, so no debts) and now am wanting to close down the business.

I don't have anyone else to do any accounts work for me as I was planning to do this myself as again as most startups agree we don't have enough to pay accountants! So, in closing this business, do I need to prepare a final accounts for both companies house and inland revenue, or do i simply close down the bank account, file for dissolution and let inland revenue know it's closed. We've not traded for past 5 months if that helps, we have no debtors. We don't owe inland revenue money cause we've made loses (our own losses, directors loan, own personal cash happy to lose) but do we still need to complete accounts etc.??

We're moving house too within the next 3 weeks, so don't want to mess with postal redirection, change of company address as that's all extra cost too. What's the best and safest and cheapest way forward please??

Many Thanks, Paul

 

[Scalloway]

Doing accounts and a tax return would tie things up. However you could just write to HMRC and say that you have ceased trading and have no funds.

 

[tonycourt]

Hi,

Despite the recent changes in company law practice and tax law it's likely in the situation you describe that a strike off and informal dissolution is possible.

It sounds like you are aware of the Companies House procedure, assuming I'm right this leaves M Revenue and Customs to deal with. They will as Scalloway suggests not usually object to forgoing formal accounts, but if they have already asked you to submit a company tax return this must still be done or you can be fined. Note that the form must be submitted online, or again you'll be fined. So my first advice is get in touch with the tax office handling your company's tax affairs.

Note you have 12 months from the time your company ceased trading to file the necessary paperwork with HMRC.

Secondly if you've lost money it might pay you to draw up formal accounts to demonstrate this. The losses might be available to reduce other tax you have paid or might pay in the future. There are to many ifs and buts to give definitive advice so my view is; see if you can wangle a free meeting or a low fixed cost one with a local accountant who can view the facts and provide a better judgement on whether it's worth putting together the figures.

TC
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[Scalloway]

Any fines imposed will belong to the company. The shareholders will have no laibility to pay. If it the company no funds it will be unable to pay them so this all seems a lot of work for no purpose.

 

[pmortl]

The long and short, bought sweets, paid for rent, paid wages (when we could to ourselves), then sales took a large dip and ended up not being able to pay ourselves so had to stop before we ended up having rent we couldn't pay either, then sold off stock at obvious loss. Should have done the whole thing as sole trader but wanted to do things the proper way and hoped business would work, just not enough profit for the amount of work to put in unfortunately.

So, you suggest to contact HMRC to say the company has no funds and made no profit (no corporation tax to pay, yes?) and ask if I need to file any accounts at a loss to myself (if I got an accountant), or I can look in my Accounting books and see if I can file it myself?

Thanks for all comments so far...

 

[Scalloway]

You can try doing it yourself though I would not recommend it. Follow this link and you will be able to download a form called CT600. Completing this will allow you to submit both accounts to Companies House and a corporation tax return to HMRC.

http://www.hmrc.gov.uk/ct/ct-online/file-return/online.htm

 

[David A]

So, you suggest to contact HMRC to say the company has no funds and made no profit (no corporation tax to pay, yes?) and ask if I need to file any accounts at a loss to myself (if I got an accountant), or I can look in my Accounting books and see if I can file it myself?

If you do the above, you'll be doing a lot of work for no benefit to anyone - particularly yourself. You've had enough heartache already, so use the existing procedures to make a clean break.

Here is the most painless way to end matters (and this is one of the ways where being limited company has its advantages):

1. Make sure you use company headed paper. Even if don't have any, knock up something simple to use as a word processor template.
2. Write to everyone to whom the company might owe money a very short letter simply stating that the company has no money so has ceased trading. Make sure you sign it as a director for and on behalf of the company.
3. If you have a bank account, close it.
4. Even if you are sole director, have a board meeting. Minute that the company has ceased trading, has no future, cannot pay you as director(s) so regrettably you must resign with immediate effect.
5. Complete and send form 288B to Companies House for every director and/or secretary. (Don't bother to fill in contact information - unless you want future contact, which I certainly wouldn't).
6. As only the shareholders can then appoint another director, and (as this presumably is yourself and maybe one other) are highly unlikely to want to do so, as there is nobody to act for the company, Companies House will eventually remove it from the register.

Before the company is removed from the register it is probably that there will be filing fines from Companies House and penalties from HMRC. DON'T FORGET THOUGH that these are debts against the company - not you.

Once you resign, forget about it. For interest, you can always log onto Companies House website to see what happens to the company.

 

[InPrintImaging]

If you do the above, you'll be doing a lot of work for no benefit to anyone - particularly yourself. You've had enough heartache already, so use the existing procedures to make a clean break.

Here is the most painless way to end matters (and this is one of the ways where being limited company has its advantages):

1. Make sure you use company headed paper. Even if don't have any, knock up something simple to use as a word processor template.
2. Write to everyone to whom the company might owe money a very short letter simply stating that the company has no money so has ceased trading. Make sure you sign it as a director for and on behalf of the company.
3. If you have a bank account, close it.
4. Even if you are sole director, have a board meeting. Minute that the company has ceased trading, has no future, cannot pay you as director(s) so regrettably you must resign with immediate effect.
5. Complete and send form 288B to Companies House for every director and/or secretary. (Don't bother to fill in contact information - unless you want future contact, which I certainly wouldn't).
6. As only the shareholders can then appoint another director, and (as this presumably is yourself and maybe one other) are highly unlikely to want to do so, as there is nobody to act for the company, Companies House will eventually remove it from the register.

Before the company is removed from the register it is probably that there will be filing fines from Companies House and penalties from HMRC. DON'T FORGET THOUGH that these are debts against the company - not you.

Once you resign, forget about it. For interest, you can always log onto Companies House website to see what happens to the company.

THe only thing I would say differently about the above is I wouldn't leave it for Companies House to remove the company from the register. I would say still submit a DS01 striking off application with a £10 fee to companies house. Failure to do so can theoretically mean that the director has failed to discharge their obligations and could as a result (theoretically at least) in them being banned from becomming a director in future.

 

[David A]

Failure to do so can theoretically mean that the director has failed to discharge their obligations and could as a result (theoretically at least) in them being banned from becoming a director in future.

Agree.

Which is why I suggest the positive action of resignation. Once a director has resigned, they are no longer liable - as Bob Diamond has demonstrated (but few will get the pay-off that he is likely to receive!).

 

[pmortl]

David, many thanks for your simple, yet detailed response. In point 2 of your reply, would that mean companies house and hmrc as well, as I don't have any other debtors at all, just the paperwork these two require. In point 4, is the point of having this meeting and producing minutes just in case they ever do any auditing, I'm just wondering who would ever get to see these minutes, or do i need to be sending them to someone?

And finally, HMRC or Companies house won't chase me and put me in prison will they, I've always been a good boy and this sounds a teeny bit scary having fines filed against the company...

In seriousness, many thanks for your reply as it saves me a whole heap of effort in figuring out how to produce accounts (accurately).
As the finer details to check, should I close down the PAYE for the company, do myself a P45 first before resigning as director?

 

[David A]

David, many thanks for your simple, yet detailed response. In point 2 of your reply, would that mean companies house and hmrc as well, as I don't have any other debtors at all, just the paperwork these two require. In point 4, is the point of having this meeting and producing minutes just in case they ever do any auditing, I'm just wondering who would ever get to see these minutes, or do i need to be sending them to someone?

And finally, HMRC or Companies house won't chase me and put me in prison will they, I've always been a good boy and this sounds a teeny bit scary having fines filed against the company...

In seriousness, many thanks for your reply as it saves me a whole heap of effort in figuring out how to produce accounts (accurately).
As the finer details to check, should I close down the PAYE for the company, do myself a P45 first before resigning as director?

Do a search of the posts of Spongebob - he has a template letter to send to debtors in your situation.

You won't be put in prison because you are acting as a director aware of your responsibilities. If you don't cease trading and then tell debtors, then that is irresponsible and you can face personal sanctions.

As a director you can be an employee and well as being paid by virtue of the office you hold. Thus regarding PAYE, if you are an employee and the company has any money at all and owes you salary/wages, then my understanding is that this is a preferential debt and you should be paid this before any other debtor. Other posters are more experienced in this area than me and will no doubt chip in.

The key thing is to try not to lose sleep over this. Closing a company is traumatic. For many who have nurtured it from small beginnings it is very upsetting for it to fail - it is probably the same as grieving, and it does hurt.

 

[Scalloway]

David, many thanks for your simple, yet detailed response. In point 2 of your reply, would that mean companies house and hmrc as well, as I don't have any other debtors at all, just the paperwork these two require. In point 4, is the point of having this meeting and producing minutes just in case they ever do any auditing, I'm just wondering who would ever get to see these minutes, or do i need to be sending them to someone?

And finally, HMRC or Companies house won't chase me and put me in prison will they, I've always been a good boy and this sounds a teeny bit scary having fines filed against the company...

In seriousness, many thanks for your reply as it saves me a whole heap of effort in figuring out how to produce accounts (accurately).
As the finer details to check, should I close down the PAYE for the company, do myself a P45 first before resigning as director?

The minutes should be available if there is any enquiry into your conduct - pretty unlikely but for all that is needed it is best to have it.

Yes you should close down the PAYE scheme. You will need a P45 for your next job.

 

[InPrintImaging]

Agree.

Which is why I suggest the positive action of resignation. Once a director has resigned, they are no longer liable - as Bob Diamond has demonstrated (but few will get the pay-off that he is likely to receive!).

There is a duty to exercise "reasonable care, skill and diligence" under s 174 of the Companies Act 2006. I don't know whether it would extend to a situation like this, but for the sake of £10, it probably ins't worth finding out the hard way.

http://www.legislation.gov.uk/ukpga/2006/46/section/174

 

[David A]

There is a duty to exercise "reasonable care, skill and diligence" under s 174 of the Companies Act 2006. I don't know whether it would extend to a situation like this, but for the sake of £10, it probably ins't worth finding out the hard way.

http://www.legislation.gov.uk/ukpga/2006/46/section/174

I am a bit of a pedant where legislation is concerned and the actual wording is:

(1)A director of a company must exercise reasonable care, skill and diligence
​

The wording can only be used as is, and it talks of a director in the current tense. Thus on resignation, a director is no longer in office and thus not subject to this clause.

But as you say, £10 is not a lot. It is still effort though, and will involve correspondence after the OP has moved meaning that his new address will have to be given to Companies House and will be on public record (unless he can get someone else to provide a service address).

 

[InPrintImaging]

The vital point is that a director can be prosecuted for acts that they did while they were acting as director. You suspect deliberately failing to dissolve a company/failing to take the necessary steps when they should have known their legal obligations, could count as negligence/lack of diligence, particularly if the steps are not onerous as in this case.

If you read the law that narrowly by saying people could only be prosecuted while they were still acting, then the legislation would be useless.

Its only £10. Not worth the risk.