Merging two ltd companies - best options?

Discussion in 'Accounts & Finance' started by anonuk, Apr 27, 2020.

  1. anonuk

    anonuk UKBF Regular Free Member

    302 44
    I'm director of two limited companies - 'Company A' and 'Company B'.

    Company A is our main business, with a turnover of around £150k at present. Company B barely a manages a turnover of £2k as we've just not had time to put into it. Both companies are vat registered because they both do very similar things so didn't want to risk being accused of tax evasion.

    I have just filed the first years accounts with companies house for Company B, showing £5k assets and £5k long term debt (owed to myself). However, we haven't asked our accountant to do the corporations tax yet because I want to get straight in my head what we want to do first.

    With the costs for the accountant to do the corporations tax return likely being around 25% of the annual turnover for the first financial year, I am seriously considering moving the brand we've been building in Company B over to Company A and just have all sales go through Company A. This would mean we wouldn't have to keep two sets of accounts, and wouldn't have to pay the accountant twice, etc.

    However, I'm not sure on the best way to go about this. Can Company A somehow purchase Company B, while at the same time 'merging' so we get rid of the second entity, or can I just sell all the assets to Company A to pay of the long term debt that Company B has, then make Company B dormant (I would quite like to protect the company name if it's possible to do this without paying to file accounts, etc)?

    Any suggestions advice welcome.
     
    Posted: Apr 27, 2020 By: anonuk Member since: Feb 27, 2014
    #1
  2. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

    5,132 910
    if you have filed accounts already why do think just to complete the CT return will be £500+?

    Have you had a filing only quote from the Accountants?
     
    Posted: Apr 27, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #2
  3. anonuk

    anonuk UKBF Regular Free Member

    302 44
    Our accountants charge our main company £900+vat per year to do our end of year/corporation tax returns so it was just a guesstimate really but that’s irrelevant to the question asked.
     
    Posted: Apr 27, 2020 By: anonuk Member since: Feb 27, 2014
    #3
  4. pbdesigns

    pbdesigns UKBF Regular Free Member

    142 11
    Assuming Company A makes a reasonable profit on the turnover you bring in, do you want to risk this with the brand from Company B?

    Ultimately, it sounds like you've not yet tested out Company B so it may not be a success. Do you want any issues with that to drain Company A?

    Making this change doesn't help the lack of the time investment into Company B - and that's the real issue to look at.

    I'd suggest either working it properly through Company B, or letting Company B sit dormant and focusing on Company A.
     
    Posted: Apr 27, 2020 By: pbdesigns Member since: Nov 23, 2011
    #4
  5. anonuk

    anonuk UKBF Regular Free Member

    302 44
    There are a couple of reasons why Company A taking on Company B’s brand (in addition to its own) would be an advantage, but yes I take your point that merging the two companies wouldn’t solve the time issue, etc.

    is it possible to make a company dormant if it has previously traded? Presumably I’d have to write off the debt so the books balance at zero?
     
    Posted: Apr 27, 2020 By: anonuk Member since: Feb 27, 2014
    #5
  6. dotcomdude

    dotcomdude UKBF Enthusiast Free Member

    514 105
    If the only debts of company B are to yourself and you have no outstanding VAT liabilities etc, I would:
    1. Sell the brand from company B to company A
    2. Use the proceeds of (1) to reduce the debt to you
    3. Close company B and you'll probably never hear anything from anyone
    Register a trademark if you want to protect a name. That has better protection than keeping a company going to just try and do the same...
     
    Posted: Apr 28, 2020 By: dotcomdude Member since: Jul 27, 2018
    #6
  7. Scalloway

    Scalloway UKBF Legend Free Member

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    You just tell HMRC the company is dormant for tax purposes. There is no need to take any other action apart from remembering to do the annual filings at Companies House.
     
    Posted: Apr 28, 2020 By: Scalloway Member since: Jun 6, 2010
    #7
  8. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

    5,132 910
    You still need to file accounts and CT Return with HMRC up to the period the company ceased to trade. Will also need to file annual dormant accounts at C/House if you want to keep the company alive and protect the company name.
     
    Posted: Apr 28, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #8
  9. anonuk

    anonuk UKBF Regular Free Member

    302 44
    Thanks. Do you still have to file corporation tax returns with hmrc for a dormant company or is it just the companies house submissions?
     
    Posted: Apr 29, 2020 By: anonuk Member since: Feb 27, 2014
    #9
  10. Scalloway

    Scalloway UKBF Legend Free Member

    16,589 3,513
    Posted: Apr 29, 2020 By: Scalloway Member since: Jun 6, 2010
    #10