How to Close a Limited Company — Strike Off vs Liquidation

Closing a limited company is more involved than just stopping trading. You have legal obligations to Companies House, HMRC, and any creditors. Get it wrong and you could face personal liability or penalties.

Here are the two main routes to closing a company, when to use each one, and what you need to do before you start.

Before you close: the checklist

Before applying to close your company, make sure you've:

• Filed all outstanding accounts and confirmation statements with Companies House
• Paid all Corporation Tax and filed all CT600 returns with HMRC
• Settled all debts — suppliers, loans, credit cards, HMRC
• Distributed any remaining assets to shareholders
• Closed your business bank account (after distributing funds)
• Cancelled any VAT registration with HMRC
• Deregistered from PAYE if you had employees
• Informed your accountant, bank, and any ongoing contracts

If you skip any of these steps, the closure process can stall or you could face unexpected tax bills.

Option 1: Voluntary strike-off (DS01)

This is the simplest and cheapest way to close a company. You apply to Companies House to remove your company from the register.

You can use strike-off if:

• The company has not traded or sold any stock in the last 3 months
• The company has not changed its name in the last 3 months
• The company is not involved in any legal proceedings
• The company has no outstanding debts (other than the cost of striking off)

How to apply:

1. File form DS01 online via Companies House WebFiling — costs £33
2. Send a copy of the DS01 to all interested parties: shareholders, creditors, employees, pension fund managers
3. Companies House publishes a notice in the Gazette giving 2 months for objections
4. If no objections are received, the company is dissolved after 2 months

The whole process takes about 3 months from filing to dissolution.

What can block a strike-off:

• HMRC can object if you have outstanding tax returns or unpaid tax
• Creditors can object if you owe them money
• Companies House will reject it if you have overdue filings

Option 2: Members' voluntary liquidation (MVL)

An MVL is a formal process where a licensed insolvency practitioner winds up your company. It's more expensive but has significant tax advantages.

Use an MVL when:

• Your company has more than £25,000 in assets to distribute
• You want to take advantage of Business Asset Disposal Relief (formerly Entrepreneurs' Relief) — paying 10% Capital Gains Tax instead of income tax rates on distributions
• You want a clean, formal closure with legal certainty

How it works:

1. Directors sign a Declaration of Solvency — confirming the company can pay all its debts within 12 months
2. Shareholders pass a special resolution to wind up the company
3. A licensed insolvency practitioner is appointed as liquidator
4. The liquidator distributes assets to shareholders
5. The company is dissolved once everything is settled

An MVL typically costs £1,500-3,000+ in professional fees. But if you're distributing more than £25,000, the tax savings usually far outweigh the cost.

Strike-off vs MVL: which should I choose?

| | Strike-off (DS01) | MVL | |---|---|---| | Cost | £33 | £1,500-3,000+ | | Time | ~3 months | 2-6 months | | Best for | Companies with minimal assets (under £25,000) | Companies with significant retained profits | | Tax treatment | Distributions over £25,000 taxed as income | Distributions taxed as capital gains (10% with BADR) | | Professional help needed | No | Yes — licensed insolvency practitioner | | Legal certainty | Lower — creditors can restore the company for 6 years | Higher — formal process with statutory protections |

Rule of thumb: If you have less than £25,000 to distribute, use strike-off. If you have more, talk to your accountant about an MVL.

What about dormant status?

If you're not ready to close your company permanently, you can make it dormant instead. A dormant company:

• Stays on the register — you keep the company name
• Still files confirmation statements (£34/year) and dormant accounts (free)
• Doesn't trade — no buying, selling, or receiving income
• Can be reactivated at any time

This is useful if you might need the company again in future, or if you want to protect the company name.

What happens to the company name after closure?

Once your company is dissolved, the name becomes available for anyone else to register. If you want to protect the name, consider keeping the company dormant instead of closing it.

If someone registers your old company name after dissolution, there's very little you can do about it.

Key takeaways

• Strike-off (DS01) is the cheapest way to close a company — costs £33, takes about 3 months
• MVL is better if you have more than £25,000 in assets — saves tax through Business Asset Disposal Relief
• File all outstanding returns and settle all debts before applying
• HMRC can block a strike-off if you have unpaid tax or missing returns
• Consider going dormant if you might need the company again