Having access to reliable accountancy services is often a key feature of a company’s success. In fact, a reliable accountant with knowledge of your industry can play a major role in building up long-term profitability.
But what happens if you want to close your business for any reason? Can an accountant close your company, or does the closure process need to be carried out by a licensed insolvency professional?
The most appropriate method of closing your company depends on the complexity of your business’ affairs, and also its financial position. Closure of a solvent limited company that has relatively straightforward business affairs may be carried out via a process known as voluntary dissolution.
In this case, your business will be wound down and struck off the register of companies at Companies House. When business affairs are more complex, however, or there are significant surplus funds for distribution, the formal liquidation process known as Members’ Voluntary Liquidation (MVL) may be preferable.
A further option is Creditors’ Voluntary Liquidation (CVL), which applies to businesses that are insolvent. So can an accountant close down your company in their professional capacity?
Due to the official nature of the two liquidation procedures mentioned, a licensed insolvency practitioner (IP) must be appointed to close down a company using Members’ Voluntary Liquidation and Creditors’ Voluntary Liquidation.
An accountant may not be able to close your business using these methods, but they can provide invaluable support and guidance on crucial issues such as HMRC’s stringent requirements, tax efficiency, and preparing the company’s final accounts.
Your accountant can support you in closing down your company using the informal voluntary strike-off process - by completing the necessary paperwork and meeting all the accountancy requirements, for example.
It is important to ensure you receive professional insolvency advice on the best closure procedure for your company, however, as there are significant risks involved if you choose the wrong method.
Choosing a process that is only suitable for solvent businesses if your company is in fact insolvent, is just one example where serious problems can arise – sometimes contingent liabilities can unexpectedly tip a solvent business into insolvency, for instance.
If there are sizeable surplus funds to be distributed on closure, the formal process, Members’ Voluntary Liquidation (MVL) is likely to be the best method. MVL is a tax-efficient procedure that can considerably reduce the tax liability for company shareholders.
Distributions are taxed as capital rather than income, which immediately lowers your tax liability. If you are eligible for Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, the effective rate of tax can be as low as 10 per cent.
You may want your accountant to complete the final accounts and statutory submissions prior to your company’s closure, and support you in ensuring the business’ tax affairs are in order. The practical aspects of closure and distribution of funds in this case, however, must be carried out by the appointed liquidator.
Again, only an appointed liquidator can close a company via Creditors’ Voluntary Liquidation. In this case there are outstanding debts that the company cannot repay, so when company assets are sold, the funds generated are used to provide creditors with as high a return as possible.
Tax efficiency is not an issue with a CVL as there are no surplus funds for distribution. The company name is permanently removed from the register at Companies House, and the business no longer exists.
Begbies Traynor are available for appointment as liquidators if required, and will ensure you meet all the legal requirements of closing down a company in the UK. We have extensive experience of helping company directors navigate this somewhat demanding process, and will provide the reliable advice you need.
Please get in touch with one of our partner-led team to arrange a free, same-day consultation. We operate a network of offices around the country, so you are never far away from professional help.
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