When closing your limited company, it is crucial to find the most tax-efficient method of doing so if you’re to extract the highest value possible. It is possible to close your ltd company without paying tax – but only up to your annual tax-free allowance limit.
Voluntary Strike Off and Members’ Voluntary Liquidation (MVL) are the two main methods of closing down a solvent limited company.
What’s The Most Tax-Efficient Way to Close a Limited Company Without Paying Tax?
What is a Voluntary Strike Off?
A Voluntary Company Strike Off is different from liquidation and is also known as dissolution.
It happens in entirely voluntary circumstances and is a common way of closing a limited company.
To qualify, the company cannot have traded, changed its name, sold assets, or engaged in any activity unless it is for the purpose of striking off in the previous three months.
A company cannot be wound up if it is currently in administration, subject to a scheme of arrangement or CVA, or has a receiver or manager appointed over its property.
The process broadly follows these steps:
• A board meeting is held to pass a resolution in writing to apply to close the company.
• Directors sign the application.
• All employees and creditors must be notified of the application.
• An application is then made using a DS01 form.
A notice will be published giving interested parties three months’ notice that the company intends to be struck off.
The business will be struck off if there are no objections during this time.
Companies must follow several other steps or at least consider, detailed in our guide to closing a company here.
Voluntary Strike Offs are the standard and most efficient method business owners usually use when closing a company. However, they still tend to be complex affairs that require expert knowledge to navigate. At Future Strategy, we can supply that knowledge and reassurance.
What is a Members’s Voluntary Liquidation?
A Members Voluntary Liquidation (MVL) is a tax-efficient procedure that enables shareholders to appoint a liquidator who will formally close down a solvent company (i.e., one that can afford to pay all its debts).
An MVL is regarded as one of the most common methods for directors and shareholders to realise a company’s assets, including buildings, vehicles, cash, etc.
The directors themselves will start the process of a company’s liquidation by contacting an Insolvency Practitioner.
The MVL process should be implemented when a solvent company needs to be wound up if it has come to the end of its useful life.
It’s always worth checking with your accountant first, but, in most cases – and with the new provisions of entrepreneur’s relief – it is more tax-efficient to take money out of the company via an MVL rather than taking it all out as a special dividend.
An MVL is not appropriate if the company is deemed insolvent (i.e., one that cannot afford to pay all its debts).
Want to Know More About Closing a Limited Company Without Paying Tax?
Contact us today. Our initial consultation is FREE.
Here we will assess the viability of the business and offer advice on appropriate strategies, including how to legally avoid paying tax where possible.
We will also advise on the solution options available concerning your specific situation and requirements. These solutions are wide-ranging, cost-effective, and flexible.
Note – You may also find this post useful to read. It looks at the process of closing a limited company with debts.
