This week we have seen some of our famous, most British of brands fall into administration.
HMV was our first this week, with 230 stores shut, and the farewell to ‘Nipper the dog’ which was reportedly the most valuable asset of the company (pictured below). Some might surmise that this is due to the massive increase of online shopping for music, from cheaper options, and also the increase of downloading music for instant gratification (whether done on a illegal or legal basis). One-up our local Aberdeen music store on Belmont Street are also closing, along with further notifications this week of Jessop’s and Blockbuster going into Administration.
Whatever the reason, it’s the end of an era!
So how does the closure of a business relate to our Oil & Gas, Nuclear and Renewable Energy and IT Contractors…? Well for a number of reasons, a Contractor may find themselves without need for their Limited Company for a period of time so they often come to us then wondering what their options are. Nothing dramatic as going into administration, but there are options to consider when the company is not required for a while.
Some reasons for not needing a Limited Company are:
- Your Current Contract might have come to an end
- You may have decided to take a turn back to a PAYE position for a while
- You may have made your money and be ready for retirement
- You may have made a decision to move and both live and Work abroad.
To close or not to close – that is the question…
Should you find yourself without a current need for your Limited Company you will likely be wondering what the best plan of action for it is. If you are not going to be trading through your Limited Company, i.e. your Contract has stopped for a period of time, but there is a possibility that you might need to trade through this Limited Company again in the future. Changing your trading status to ‘Dormant’ might be the best option.
Please note that ‘Dormant’ is not a ‘status’ as such, with Companies House; rather it’s how your Accountant would define the status of your business.
If your company is Dormant and there are no transactions running through the business for a period of time, but you have still traded in the Accounting Year, then a set of Limited Company Accounts, a Corporation Tax Return and a Personal Tax Return will still be required. Your VAT returns, if VAT registered, will still need to be submitted, and we would likely be submitting what are called ‘Nil Returns’. PAYE Nil Returns would also need to be submitted. Generally, your Accountant will need to ensure that everything is ticking along nicely while you are not trading through your Limited Company, and will also likely charge you less because there’s a lot less time and effort required to complete the work for you. The great thing about your Limited Company being in a dormant status is that when the period of not working through the company comes to an end, everything can launch back into full swing with very little hassle on your behalf.
Though every situation for contractors varies, and some clients may find their company is dormant for years, there may come a stage where you are certain that you will never trade through this Limited Company Again.
Your company can be in a dormant status for as long as you need it to be, and it makes perfect sense to keep this Limited Company running in the background if you feel it will be utilised again down the line.
Should you reach a stage where it seems that you will certainly never use this Limited Company again, the closure of the Limited Company might seem like your best option. The main thing to bear in mind when closing your Limited Company is that it is a lengthy process often with a lot of paperwork to take care of. From the time you decide to close this company, it can take over a year until the Limited Company is fully dissolved in the eyes of Companies House and HMRC.
If the company has no debts or liabilities to be paid, your Accountant will apply for ‘Voluntary Striking off, and dissolution’.
Should you wish to close your Limited Company, and you are a client of FW Accounting, our Business Administration team will take care of absolutely everything involved with this process and keep you posted on progress every step of the way. Once your company is closed it will be removed from the Companies House register and will no longer exist. Once the closure process is complete and your Limited Company has been removed from the register, there will be no further Accountancy fees or processing of expenses etc, to take care of.
At FW Accounting, if you are thinking of closing your Limited Company down, we urge you to consider if you will ever require this method of trading again. If you are simply taking a PAYE position for a short period of time (even a year), setting your company to dormant could be the best option for you.
If this is something you are currently considering, please ask your friendly FW Accounting advisor, who will be happy to talk you through the options in further depth.
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