Most Common Fatal Mistake we make when closing a Limited Company

closing limited company

Most Common Fatal Mistake we make when closing a Limited Company

The most common fatal mistake that is done by directors when closing their limited company by sending a strike off form to Companies House.

When a director or the directors decide to bring the business to an end, there are several compliance issues to be carried out so as to prevent tax compliance issues in future.

I will like to suggest the following steps that could be of use to you in the event of closing your limited company.

1. Preparing final accounts and informing HMRC of the intention of the closing theLimited company.

When a limited company closes down, it automatically brings the chargeable accounting period to an end. The last accounts have to be prepared and submitted to HMRC. The directors are liable to pay the final tax or make payment plans arrangement with HMRC.

2. Disposal of the assets of the limited company while closing the Limited company.

This can be done either by distribution to the directors and shareholders or sold to an unconnected person

When the asset is transferred to the directors for no consideration, it must be transferred at the lower of market value at the date of transfer and the cost. However, the dividend must be treated as a dividend in specie to the shareholders.

However, if the assets are disposed to an unconnected person, the consideration that would be declared to HMRC is the lower of cost and actual consideration.  This may give rise to balance charge or balance allowance.


3. Preparing and submitting your last self-assessment return before closing your limited company.

The directors and shareholders usually expected to register and submit tax return year every year if the company is active, they receive dividend and benefit in kind.

The directors are expected to submit their last tax return and inform HMRC on the closing of the company on the self-assessment return.

The implication of this is the last return is submitted and the requirement to submit future returns is canceled.

4. Preparing your last Vat Return if applicable and payments before closing your limited company.

Another compliance issue is your VAT.

The final VAT returns have to be submitted and the business would need to deregister. Arrangement for Final payment will need to be made.

5. Preparing last PAYE returns and making payment plans before closing your limited company.

The directors would also have to submit their final PAYE real-time submission if this is applicable to the business and also make outstanding payment or make arrangement for payment.

6. Method of closing the company.

The directors can dissolve the company either by liquidation or strike off from company’s house.