Updated: 7 January 2025
Closing a limited company can feel overwhelming, especially when you’re unsure about the costs involved. It could be as little as £33—or thousands of pounds—depending on your company’s situation.
If you’re worried about the process or making the wrong choice, this guide will help. We’ll explain the cost of closing a limited company and the different options available. You’ll learn how to pick the right options for your needs.
What is the cost of closing a limited company?
The cost of closing a limited company depends on several factors, such as its financial health, the complexity of its accounts and the chosen closure method. Here’s an overview of the main options:
Each option has its own requirements, benefits, and implications for directors. Let’s break them down in more detail to help you decide which approach is right for your company.
How much does it cost to close a solvent limited company?
If your company can pay all its debts and has more assets than liabilities, it is considered solvent. This means you have more flexibility in choosing how to close it. Solvent companies have two main closure options: Voluntary Strike-Off or Members’ Voluntary Liquidation (MVL).
Voluntary Strike-Off
Voluntary Strike-Off is the simplest way to close a solvent business. It involves applying to have your company removed from the Companies House register, effectively ending its legal existence.
This method works best for companies that are no longer trading and have minimal assets or liabilities. It’s also a good option for businesses that were set up but never actively operated.
To qualify for Voluntary Strike-Off, your company must meet the following conditions:
Stopped trading: Your business must have ceased all operations for at least three months.
No debts: All outstanding liabilities, including taxes and creditor payments, must be settled.
No recent activity: The company should not have changed its name or entered into new financial agreements within the past three months.
As part of the process, directors must notify all relevant parties of their intention to strike off the company. This includes shareholders, creditors, employees and HMRC. Failure to inform these parties can result in penalties or objections to the application.
Voluntary Strike-Off is straightforward and cost-effective, making it ideal for companies with minimal financial complexities. However, it may not be the best option for businesses with significant assets, as distributions through this method are taxed as income rather than capital gains.
How much does Voluntary Strike-Off cost?
The main cost of Voluntary Strike-Off is the Companies House fee, which is £33 for an online application or £44 for a postal application.
There may also be additional costs if you require professional help to close your accounts or submit final tax returns. Accountant fees typically range from £200 to £1,000, depending on the complexity of your business finances.
While Voluntary Strike-Off is one of the most affordable ways to close a company, it’s not always the most tax-efficient. If your business has significant assets, distributions will be taxed as income rather than capital gains, which can result in a higher tax bill. In such cases, a Members’ Voluntary Liquidation may be more suitable.
Members’ Voluntary Liquidation (MVL)
A Members’ Voluntary Liquidation (MVL) is a formal process used to close a solvent company in an efficient and professional manner. It’s ideal for businesses that have ceased trading and have assets typically exceeding £25,000.
Unlike a Voluntary Strike-Off, an MVL involves appointing a licensed insolvency practitioner to oversee the closure. This ensures that all legal requirements are met and the process is carried out smoothly.
Advantages of an MVL:
Tax efficiency: Funds distributed during a Members’ Voluntary Liquidation are subject to Capital Gains Tax (CGT), which is much lower than Income Tax. If you qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), you could benefit from a reduced CGT rate of just 10% on qualifying business gains.
However, this rate will increase to 14% in April 2025 and rise again to 18% in April 2026. Acting sooner could help you maximise your tax savings.
Contact Clarke Bell today to start your MVL and secure your savings
before the changes take effect.
Professional Oversight: A licensed insolvency practitioner manages the entire process, including dealing with the legal aspects and distribution of assets to the relevant parties.
An MVL is particularly beneficial for directors looking to save on taxes and wind down a company with significant assets. It provides a structured and professional way to close the business, leaving no loose ends.
Related: Autumn Budget 2024: Updates on MVLs and CVLs for Company Directors
How much does Members’ Voluntary Liquidation cost?
With Clarke Bell, the cost of a Members’ Voluntary Liquidation (MVL) starts at just £995 (+VAT, + disbursements).
Our aim is to keep your costs as low as possible. This means that you can get the money out of your company in the most affordable way.
How much does it cost to close an insolvent limited company?
If your company is unable to pay its debts or meet its financial obligations, it is considered insolvent. In this situation, there are two ways to close the business: Creditors’ Voluntary Liquidation (CVL) or Compulsory Liquidation.
Creditors’ Voluntary Liquidation (CVL)
A Creditors’ Voluntary Liquidation (CVL) is a formal process initiated by the company directors when they realise their business can no longer pay its debts. This voluntary liquidation option allows directors to take proactive steps to close the company in a structured and professional manner while ensuring creditors are treated fairly.
Benefits of a CVL:
Avoids Compulsory Liquidation: By opting for a CVL, directors can prevent creditors or HMRC from forcing the company into Compulsory Liquidation. This allows directors to take control of the company’s closure, demonstrating responsible action and protecting their professional reputation.
Director Control: Directors can appoint an insolvency practitioner of their choice to manage the liquidation process, rather than having one imposed by the court.
Cost Coverage Through Asset Sales: In many cases, the sale of the company’s assets is used to cover the liquidation fees, minimising the financial burden on directors.
A CVL provides an orderly way to close a struggling business. It also allows directors to demonstrate responsible behaviour, which is important for protecting their future business prospects.
How much does a CVL cost?
The cost of a Creditors’ Voluntary Liquidation (CVL) at Clarke Bell starts from £1,995. This fee covers the essential steps of the liquidation process, including the appointment of a licensed insolvency practitioner and the management of creditor claims.
Additional costs may apply, depending on the complexity of your company’s finances. For example, the number of creditors involved, the type and value of assets to be sold, and any additional legal or administrative work required can influence the overall cost.
At Clarke Bell, we take the time to assess your company’s situation and provide a clear and competitive quote. This ensures you have a full understanding of the costs involved before moving forward, giving you peace of mind throughout the process.
Related: If Your Company Has Debt Problems, Make Sure You Pick
The Best Option To Deal With It
Compulsory Liquidation
Compulsory Liquidation is a process initiated by creditors, such as suppliers or HMRC, to force the closure of a company due to unpaid debts. This is a formal court-driven process, unlike voluntary methods where directors have more control. Creditors file a winding-up petition, and if approved, the court orders the liquidation of the company.
Compulsory Liquidation often has severe consequences for company directors:
Loss of Control: Directors have no say in the process once the court order is granted.
Reputational Damage: Being forced into Compulsory Liquidation can harm the directors’ credibility and future business prospects.
How much does Compulsory Liquidation cost?
One of the key differences in Compulsory Liquidation is that creditors cover the initial costs, including petition and court fees. These costs, typically around £2,500, are later recouped from the sale of the company’s assets. A liquidator is then appointed by the courts to handle the sale of assets and distribute the proceeds among creditors. Liquidator fees generally range from £1,500 to £3,000, depending on the complexity of the case.
Compulsory Liquidation often leads to serious consequences for directors. We advise you to act early by choosing a Creditors’ Voluntary Liquidation (CVL). A CVL allows directors to manage the closure process proactively and with greater control.
Do you have to pay tax if you close a limited company?
Yes, there are tax obligations when closing both solvent and insolvent companies. Understanding these taxes is essential to avoid penalties and ensure compliance.
Corporation Tax: Any profits made during the company’s final accounting period must be declared and taxed before closure.
Capital Gains Tax: For solvent companies going through a Members’ Voluntary Liquidation (MVL), distributions are taxed at the lower Capital Gains Tax (CGT) rate of 10% if Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) applies. This provides substantial tax savings compared to other rates. However, this rate is set to change, increasing to 14% in April 2025 and 18% in April 2026, making early action even more beneficial.
Income Tax: Funds distributed through Voluntary Strike-Off are treated as dividends, which are taxed at higher rates than Capital Gains Tax.
VAT: Companies registered for VAT must file a final return and settle any outstanding VAT liabilities before deregistration.
Proper tax planning is crucial when closing a company. Working with your accountant can help you minimise liabilities, meet all tax obligations and ensure the process is handled correctly.
Related: Members’ Voluntary Liquidation Tax: A Guide for Directors
Ready to take the next steps? Get in touch with Clarke Bell today
Closing a company is a big decision, and it’s important to choose the right approach for your circumstances. Whether your company is solvent or insolvent, taking early, informed action can save you time, money and stress. Seeking professional advice ensures the process is handled correctly, protecting your interests and reputation.
For expert guidance and tailored support, Clarke Bell is here to help. Our experienced insolvency practitioners and team of administrators can guide you every step of the way. Contact us today for a free consultation and take the first step toward closing your company with confidence.
