If, for whatever reason, you decide to close your company there is an established procedure for when you decide to cease trading. Cessation accounts are the final set of accounts your company will prepare. They cover the trading activity to your date of cessation from the date your company started trading or when the last set of statutory accounts were prepared.
Your cessation date is the date of the last invoice raised or expense incurred. The company will have continued to collect debts and pay creditors after the date the company ceased to trade. The cessation accounts also reflect an assessment of the recoverability of unpaid debtors and creditors and also any fixed assets.
There are certain conditions you should be aware of, outlined Section 1004 and 1005 of the Companies Act 2006, that apply to the 3 months after ceasing trading activity.
The need for cessation accounts
Cessation accounts are produced in order to determine final amounts owed by the company and the final funds available for you to withdraw.
Before a company can be dissolved all creditors need to be identified. As long as you have kept up to date with PAYE and VAT payments the only creditor likely to be owed by your company after you have ceased to trade is the Corporation Tax due on the profits for your last trading period as shown in your cessation accounts. HMRC requires a copy of your cessation accounts to support your final tax computation and CT600 Corporation Tax Return.
There is no requirement to file a set of final accounts at Companies House. Please be aware that until your company has requested voluntary strike off, it must file statutory accounts and other returns with Companies House every year. As a director of your company you may face prosecution and penalties for not filing accounts. Where statutory filings are not made in the required timescales, the Registrar will strike the company from the register, at which point all property, including monies in the business account/s will become the property of the Crown.
The practicalities of cessation accounts
You may still have funds in your company bank account, but you can’t instantly withdraw them all. You can withdraw a final company dividend, but should leave the funds for the final Corporation Tax liability, and only if you are confident that all other liabilities have been settled.
You should close your company bank account when you are satisfied all debtors / creditors have been refunded/ paid, to ensure all monies have been collected and paid into the company bank account. Once the company has filed for dissolution, you will be unable to open another bank account in the company’s name to receive any repayments.
When the company is dissolved, the bank account(s), and any monies in it/them become ‘Bona Vacantia’ (un-owned goods), and will become the property of the Crown, under the control of the Treasury Solicitor. As such it is recommended that you withdraw the final company dividend prior to filing the DS01 form (striking off application by a company) with Companies House.
The 3-month period
Section 1004 and 1005 of the Companies Act 2006, states that a company cannot make an application for voluntary strike off if, in the last 3 months, it has:
- Traded or otherwise carried on business
- Changed its name
- Made disposal of property or rights that, immediately before ceasing to trade or otherwise carry on business, it held for the purpose of disposal for gain in the normal course of trading or otherwise carrying on business. Your company could sell its property such as company car, laptop or tools in readiness for closure however; it could not continue to provide your services as a contractor in the 3 months prior to filing for voluntary strike off.
- Engaged in any other activity except one, which is necessary or expedient for the purpose of making an application for strike off, or deciding whether to do so. Making payment for our cessation services or the filing of the DS01 form with Companies House is allowed as part of the company’s closure as is, concluding the affairs of the company and complying with any statutory requirement such as the filing of an annual return with Companies House.
Other restrictions on filing for voluntary strike off
A company cannot apply to be struck off if:
- It is the subject, or proposed subject, of any insolvency proceedings or,
- A section 895 scheme, i.e. a compromise agreement or arrangement between the company and its creditors
Tax matters once the company is dissolved
If your limited company has already been dissolved at Companies House you will still need to complete the closure with HMRC by filing a final company tax return and making the final tax payment.