How much does it cost to close a company?

What’s the most cost-effective way to close a limited company?

There are several ways to close a limited company. The right option for you will depend on the particular circumstances of your business, but the cost of the different procedures is always something to consider.

Some company closure methods have higher fees but other benefits that may make them more cost-effective overall. For example, they may be more tax efficient or reduce the risk of adverse financial consequences for the directors. Here we discuss the different closure methods, how much they cost and when they’re suitable.

How much does it cost to close a solvent company?

If your company can afford to repay its debts, there are two ways to close it: Strike Off and Members’ Voluntary Liquidation (MVL). Strike Off is the cheapest company closure method, but it’s also less tax efficient than an MVL if the company has significant assets or retained profits.

How much does Strike Off cost?

Strike Off is usually the quickest and cheapest way to close a limited company. You administer the process yourself, so there’s no need to pay a liquidator, and it costs less than £50 to submit an online or paper application to Companies House. Companies House will then process the application, and if your business meets the requirements, it will remove it from the official register.

Realistically, the application is unlikely to be the only cost involved in the process. To prepare the business for Strike Off, you may need to make redundancy payments to employees, pay termination or early exit fees on contracts and pay an accountant to submit final accounts and tax returns. Even for small companies, that can lead to a total cost of £1,000 or more.

When you dissolve a company, all distributions over £25,000 are treated as income rather than capital gains and taxed at your personal rate. That makes Strike Off best suited to solvent businesses with few assets and little retained profit to distribute among the shareholders.

How much does Members’ Voluntary Liquidation cost?

Members’ Voluntary Liquidation (MVL) is a formal procedure you initiate voluntarily to close a solvent company. You must appoint an Insolvency Practitioner to act as the liquidator and close the company on your behalf. They charge a fee for their work, which starts at around £2,000 for small businesses with few assets and rises to £4,000 when more assets are involved.

The liquidator’s fee covers the cost of collecting debts owed to the company, repaying any creditors, selling the assets and distributing the proceeds to the shareholders. You also have to pay expenses, known as disbursements, which are a mandatory part of the MVL process. That includes the cost of placing statutory advertisements in the Gazette and informing creditors of the liquidation process.

Although an MVL typically costs more than Strike Off, it is more tax-efficient. In an MVL, you pay Capital Gains Tax (CGT) on all the profits distributed to the shareholders. You may also be eligible for Business Asset Disposal Relief, which reduces the rate of CGT you pay.

Meet The Team

Get A Free Quote – Take The Test

Take Our 60 second Test And Find Out

Company Health Risk Assessment
Types Of Liquidation Available

Alternatives To Liquidation
Understand Your Next Steps

Get a Quote

How much does it cost to close an insolvent company?

If your company cannot pay its debts when they are due, it is technically insolvent. You cannot Strike Off an insolvent company. Instead, you must close it via Creditors’ Voluntary Liquidation (CVL) or Compulsory Liquidation.

How much does Creditors’ Voluntary Liquidation cost?

Creditors’ Voluntary Liquidation is the most common way to close an insolvent limited company. You must appoint an Insolvency Practitioner to act as the liquidator and pay their fee. You can expect to pay around £3,000 to £5,000 plus mandatory expenses known as disbursements.

The exact cost depends on factors such as the number of creditors, the type and quantity of assets and the business’s complexity. However, the liquidator’s fee is usually paid using the money raised by the sale of assets. If there are insufficient assets to cover the cost, you may be eligible to claim director redundancy pay and use that to pay for the procedure.

How much does Compulsory Liquidation cost?

The other main way to close an insolvent company is Compulsory Liquidation. In this case, the business is forced into liquidation by a creditor that’s chasing an outstanding debt, commonly HMRC or a bank. The creditor must pay the initial costs to put the company into liquidation. It costs more than £2,000 to file the Winding Up Petition, although the creditor will hope to recover that money from the sale of assets.

The court will appoint an Official Receiver to administer the liquidation. The money raised by the sale of company assets will usually cover their fee, although the director may have to use their own funds if the assets are insufficient. The costs start at around £3,500 + expenses and vary depending on its complexity.

Although the costs are similar, Compulsory Liquidation does not provide the same level of protection as a Creditors’ Voluntary Liquidation. The liquidator will scrutinise the directors’ conduct more closely and their investigation could lead to costly penalties, including personal liability for some or all of the company’s debts.

Don’t Fall Foul of Unqualified Advice

Beware of the risks of unregulated advisers – only licensed insolvency practitioners can handle insolvency appointments and closure procedures from beginning to end. In contrast, unlicensed insolvency advisers will pass your enquiry onto a third party and charge a premium for doing so. Contact our licensed, specialist team today for FREE.

What if my company cannot afford to pay for liquidation?

If there are insufficient assets within the company to cover the cost of the liquidation process, the directors may have to use their personal funds to pay the liquidator’s fee. If you have been working as a PAYE employee of the company for at least two years, you may be eligible for director redundancy pay. That averages around £10,000 in the UK and should more than cover the liquidator’s fee.

If you are not eligible for redundancy pay, you may be able to negotiate a payment plan with the Insolvency Practitioner to make the cost more manageable. However, your options will depend on the complexity of the liquidation and your personal financial position.

What’s the most cost-effective company closure method?

Whatever your circumstances, we can help you find the most cost-effective closure method for your company. Please get in touch for a free and confidential assessment. As licensed Insolvency Practitioners, we can assess your financial situation, explain your options and handle the process from start to finish.

Need to speak to someone?

With multiple offices across the UK and a vastly experienced team of business closure experts, you are never far away from the advice you need. Our Licensed insolvency practitioners provide free consultations to all directors and shareholders, and can quickly ascertain which closure method is best for your business.

We are licensed by recognised professional bodies and have helped thousands of directors over many years. Contact us today for your free company closure consultation.