Why and How to Strike Off a Dormant Entity
During the restructuring process of a group of entities, especially after multiple acquisitions or business divisions, there are a number of dormant entities that need to be struck off to eliminate inefficiencies associated with filing dormant accounts and confirmation statements.
Why Strike Off a Dormant Entity?
Time savings on filing dormant accounts and annual confirmation statements (formerly known as an 'annual return') if managed in-house.
Cost savings on potential late filings.
Cost savings if accounts are filed by external accountants.
Cost savings on secretarial fees for filing an annual confirmation statement.
Note: Striking off the company is usually the cheapest way to close it (online application cost: £8, postal application cost: £10). Only solvent limited entities can be struck off.
How to Strike Off a Dormant Entity?
Here's an easy guide on how to strike off solvent dormant entities in-house:
Check if the company has been a dormant entity for the last 3 months, meeting the following criteria:
Has not traded or sold off any stock in the last 3 months.
Has not changed names in the last 3 months.
Is not threatened with liquidation.
Has no agreements with creditors, such as a Company Voluntary Arrangement (CVA).
Announce your plans to interested parties and HM Revenue and Customs (HMRC) with letters (keep a proof of delivery):
Fill in an application to strike off and send a copy within 7 days to anyone who could be affected, including members (usually the shareholders), creditors, employees, managers or trustees of any employee pension fund, and any directors who did not sign the application form.
Ensure your employees are treated according to the rules:
pay their final wages or salary.
follow rules if you make staff redundant.
pay PAYE and NI and notify HMRC that the company has stopped employing people.
Deal with your business assets:
Share any business assets among the shareholders before the company is struck off.
Note: Anything left will go to the Crown, including any future payments the company may receive, such as refunds from HMRC. You'll have to restore the company to get anything back.
Send final statutory accounts and a Company Tax Return to HMRC, and pay tax liabilities.
Close any bank accounts and transfer any domain names.
Apply online to strike off.
What Happens Next?
You'll receive a letter from Companies House to let you know if you've filled in the form correctly. If you have, your request for the company to be struck off will be published as a notice in The Gazette. If nobody objects, the company will be struck off the register once the 2 months mentioned in the notice have passed. A second notice will be published in The Gazette, indicating that the company does not legally exist anymore.
Capital Gains Tax on Personal Profits:
If you take assets out of the company before it's struck off, you might have to pay Capital Gains Tax on the amount. You might be able to get tax relief on this through Entrepreneurs' Relief. You will work this out on your personal Self Assessment tax return. If the amount is worth more than £25,000, it will be treated as income, and you'll have to pay Income Tax on it.
Keeping Records:
If the company employed people, you should keep copies of its employers' liability insurance policy and schedule. You should keep other business documents for 7 years after the company is struck off, such as bank statements, invoices, and receipts.
Useful Links:
Ways to Close a Limited Company: https://www.gov.uk/closing-a-limited-compan
Limited Company Strike Off from the Company Register: https://www.gov.uk/strike-off-your-company-from-companies-register
Government Guidance on a Company Strike Off: https://www.gov.uk/government/publications/company-strike-off-dissolution-and-restoration/strike-off-dissolution-and-restoration#how-to-apply-for-strike-off-and-who-to-tell
Link to the Online Application Form: https://find-and-update.company-information.service.gov.uk/close-a-company/
