Company dissolution and importance of VAT de-registration post dissolution

There are two ways in which a company can be dissolved in the UK. That will depend on whether or not the company has sufficient funds to pay off all the debts. Those debts can include:
• VAT for the final period
• Corporate tax for final period
• Accrued accountancy fees
• Money owed to suppliers
• Overdrafts and bank loans
• Unpaid PAYE and national insurance on payrolls
• Lease agreements
• Funds owned to shareholders and company directors

In case the company is unable to pay the debts, it will go into insolvency proceedings (the nature of the proceeding can vary).
During the insolvency procedure the company management will hire an insolvency practitioner, who will restructure the finances in order to keep the company running, or even sell off company assets so the outstanding balances and debts to the creditors could be paid off.

When company can pay off all the owed money, the closing procedure is pretty straightforward. These are the steps of company dissolution procedure:

• No further business transactions should be carried; except for the ones necessary for closing up procedure.
• Everyone to whom the money is owed should be paid off; otherwise they can object to company’s dissolution.
• Company business bank accounts cannot be closed until all the debts have been paid off. All the loans received from shareholders/directors must be repaid to them.
• The financial agreement for vehicles/equipment in acquisition (whether hired, purchased or on lease in the agreement) must be ended by contacting the financial company.
• Final payroll for the staff must be issued and form P45s must be filled up. In some cases return of final payroll information must be shared with HRMC.
• It’s important for a company going through dissolution to apply for VAT de-registration with HMRC. A final return on VAT is also must be completed and if there is any payment due on return, it needs to be paid.

It’s important to prepare and submit a final set of accounts with the HMRC. HMRC must be informed of the company’s dissolution and that there will be no taxable income anymore.

Corporation tax is the last payment made from the bank account of the company. Company will get 9 month from closing date to pay corporation taxes. However, company cannot be shut down until corporation tax has been fully paid.

• It can take months to close down the company after the decision of dissolution has been made. During that period the company remains dormant so that all the formalities can be carried out.
• In case there is any equipment or money left in the account after everyone has been paid off, it will be distributed among shareholders in their shareholdings’ proportion, unless the article of association has different provisions related to the same, although that is rare.
• After all the debts and outstanding amount has been paid and after three months of company inactivity; directors can submit an application with the Companies House under Section 1003 of Companies Act 2006 to strike off the company. A fee of £10 needs to be paid to Companies House and DS01 striking off application will need to be submitted.

Also if you decide to keep your company dormant on the register, it will cost less than £100 per year. You will be able to use this company again later without wasting time and money for set up process of a new company. Also the name of the company will be reserved. Plus old company will have more financial credibility than a newly incorporated one. But if you don’t plan to use the company for more than 5 years, it is more cost effective to close it down.

VAT de-registration and why it’s important
The company cannot be officially shut down until you have applied for VAT de-registration. Besides, it’s important to inform the authorities that there will not be taxable income any more. Not informing the HMRC can result in objections and unnecessary delays, and extra fees.

Cancelling VAT registration online
Cancelling of VAT can be performed online. By logging into your ‘Government Gateway’ account you can opt for VAT de-registration. You will get to choose what all changes you wish to carry out during the process. Alternatively, companies can hire an agent to do this job on their behalf. However, be sure to check the accuracy of the information supplied when an agent is involved.
You can also fill in and send form VAT7 to de-register for VAT by post.

ZDK Formations Limited will help you to dissolve a company, by dealing with all the paperwork and fees in a fast and efficient manner.
We charge £45.99 for dissolution.
Also we perform VAT de-registration for £70.
All prices are subject to VAT 20%.
Please contact us and we will be happy to help you with all formalities.

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