Winding Up

If you have stopped trading through your own personal limited company and have no further use for it you could sell the shares or wind it up taking out any value as cash.

There is a very limited market for second hand companies which do not hold any valuable assets, so winding up the company is probably the next best solution.

There are two ways to do this: a formal liquidation or an informal dissolution when you simply apply for the company to be struck off the register at Companies House.

A licensed insolvency practitioner needs to be appointed to carry out a liquidation and their fee will be at least £1,500.  However, all the surplus  funds can be paid to you as a capital gain.  If this is done within three years of the date the company stopped trading you may be eligible to claim Business Asset Disposal Relief (BATR), reducing the rate of tax payable on the gain to just 10%.

All the conditions for BATR need to be met for at least 24 months to the cessation of trade, so we need to look closely at who held the shares during that period and what operations were conducted through the company.

Using an informal dissolution up to £25,000 of value from the company can be treated as a capital gain.  If the amount distributed on dissolution of the company is greater than £25,000, then the whole amount is taxed as if it were a dividend. You may wish to reduce the value in the company by paying out a dividend before the dissolution process starts.

Beware of starting up a similar business within two years of winding-up your company as that can result in all the value received on liquidation of the old company being taxed as dividends.