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What’s the most cost-effective closure method for my limited company?

The expenses associated with closing a limited company in the UK can vary significantly based on your specific circumstances. Striking off a solvent company from the Companies House register incurs a £10 administrative fee, while liquidating an insolvent company can cost £4,000 or more.

 

What is the cost of closing a limited company?

Closing a limited company can be an affordable and straightforward process. If your business has stopped trading, can settle all its debts, and possesses assets valued at less than £25,000, you can initiate the closure through a process known as Voluntary Strike-Off. This incurs a maximum fee of £10, and all that’s required is submitting the relevant paperwork to Companies House.

On the contrary, if your business is insolvent, you need to engage an insolvency practitioner to oversee the closure. Serving as the liquidator, they will handle outstanding contracts with suppliers, identify and sell assets, and settle outstanding debts. Insolvent liquidations involve significant work, and typical fees range from £4,000 to £6,000, depending on the complexity of the case.

 

How much does it cost to close a limited company without debts?

Closing a limited company that can settle all its debts is a relatively uncomplicated process. There are two routes to consider, and the most suitable option depends on the value of the company’s assets.

If the company’s assets are valued at less than £25,000, Voluntary Strike-Off is typically the preferred choice. Conversely, if the company holds substantial assets for distribution, a Members’ Voluntary Liquidation (MVL) may involve higher initial costs but can result in significant tax savings that outweigh the liquidator’s fee.

 

How much does Voluntary Strike-Off cost?

Voluntary Strike-Off, also referred to as Dissolution, stands as the most economical and expeditious method to close a limited company. The application for strike-off online costs just £8, or £10 if submitted using form DS01 to Companies House.

For a solvent company with assets valued at less than £25,000, which has not traded or changed its name in the past three months, the option of Voluntary Strike-Off is available. Assuming the relevant parties have been notified, and there are no objections, the company will be delisted from the Companies House register, ceasing to exist.

 

How much does Members’ Voluntary Liquidation cost?

Members’ Voluntary Liquidations (MVL) typically start at around £1,500 for small companies with few assets and can increase to over £3,000 when more valuable assets are involved. If your company is solvent and possesses assets exceeding £25,000 to distribute among its shareholders, opting for an MVL could be the most cost-effective method of closure.

Despite the associated costs, this process can result in a substantially lower tax bill compared to a Voluntary Strike-Off. This is because all distributions are subject to Capital Gains Tax rather than Income Tax. If you qualify for Business Assets Disposal Relief, you may only have to pay a 10% tax on the proceeds from the sale of company assets.

 

How much does it cost to close a limited company with debts?

If your company is facing financial difficulties and is unable to settle its debts, a Creditors’ Voluntary Liquidation (CVL) stands as the prevalent method of closure. This process incurs higher costs compared to solvent liquidation, given the typically increased workload for the liquidator.

The alternative process is known as Compulsory Liquidation. In this scenario, your creditors must incur expenses to file a Winding Up Petition against your company, compelling it into liquidation. However, this is not a straightforward option, as your actions as a director will undergo scrutiny, and you could potentially become liable for company debts or face disqualification from future directorial roles.

 

How much does Creditors’ Voluntary Liquidation cost?

As a rough estimate, the cost to liquidate an insolvent company with relatively few assets, minimal debtors, and no ongoing litigation falls in the range of £4,000 to £6,000. This figure may increase for more intricate cases.

Contrary to its name, this process is not triggered by your company’s creditors. As a company director, you opt to initiate the process voluntarily and engage an insolvency practitioner to oversee the liquidation on your behalf.

 

How much does Compulsory Liquidation cost?

The expense to compel your company into Compulsory Liquidation typically amounts to approximately £2,500. This includes a fee for issuing the Winding Up Petition, a court deposit, and a filing fee. Initially, the petitioning creditor covers this fee, with the expectation of recouping it from the proceeds of selling your company’s assets.

If your company possesses assets for sale, a liquidator will also be appointed. Their fee is usually in the vicinity of £2,000, funded through the proceeds generated from the asset sale.

 

How can I pay to liquidate my limited company?

In solvent liquidations, the liquidator’s fee is typically manageable, often covered by the proceeds from the sale of your company’s assets. However, in the case of insolvent companies, the situation is not always as straightforward.

In a Creditors’ Voluntary Liquidation, the liquidator’s fees take precedence over other creditors, allowing them to be covered by the asset sale. Nevertheless, if the value of your company’s assets is insufficient to meet the cost of liquidation, you might become personally liable for the liquidator’s fee or be required to bridge the shortfall.

It’s worth noting that in the voluntary liquidation scenario, you may be eligible for director’s redundancy pay, which averages around £12,000. This amount could more than offset the liquidator’s fee. 

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Do you want to close your limited company?

If you are contemplating the closure of a solvent or insolvent company, our team of insolvency practitioners can assist you in identifying the most cost-effective closure method tailored to your specific circumstances. Feel free to call us for a free, same-day consultation or arrange an in-person meeting at one of our 100+ offices across the UK.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.