How do I close or dissolve a limited company correctly?

Closing a limited company is one of those decisions that feels straightforward at first, only for the practical steps to reveal themselves as more complicated than expected. In my opinion the most important part of dissolving a company is understanding that the legal process is only one element. Before you ever file the dissolution paperwork you must make sure your accounts, tax obligations, creditors, assets and records are all in the right state. If you try to strike off a company without doing this groundwork you can end up with fines, objections or the company being restored later by HMRC or a creditor.

This guide explains how to close or dissolve a limited company correctly, the difference between striking off and liquidation, what you must do before applying, what happens to remaining assets, how HMRC responds and the mistakes that often cause delays. By the end you will understand exactly what the process looks like from start to finish and how to avoid common problems.

Understanding whether striking off is appropriate

Not every company can simply be dissolved using the Companies House strike off route. Striking off is only appropriate when the company is no longer trading, owes no money, has no legal disputes and has no outstanding tax liabilities. It is a simple administrative closure, not a way to escape debts or avoid responsibilities. If the company has creditors, formal liquidation may be the correct route instead.

Where a company has never traded or stopped trading completely and all obligations have been met, voluntary strike off is generally the cleanest and simplest option. HMRC has become much more active in reviewing strike off applications, so if there are any outstanding corporation tax returns, VAT returns, payroll liabilities or bounce back loan issues the application will almost certainly be blocked. In my experience this is the step many directors underestimate. The company must be tidy before you even begin the strike off process.

Preparing the company before you close it

The groundwork you do before filing the strike off application is more important than the application itself. You must bring trading to a complete stop. That means no invoices, no payments received after ceasing to trade and no ongoing contracts. You must close down the payroll scheme and tell HMRC the final submission has been made. You must cancel VAT registration if applicable. You should bring the company bank account balance to zero and distribute remaining assets correctly because any assets left in the company when it is dissolved become property of the Crown.

Closing down also means collecting all money owed to the company, paying suppliers, settling tax liabilities and filing any outstanding accounts or corporation tax returns. You should pay employees their final wages and holiday pay and deal with any redundancy where needed. If the company owns assets such as computers, vehicles or cash you must either sell them or distribute them to shareholders formally. These steps are much easier to manage before applying for strike off than afterwards.

In my opinion the best way to think about it is simple. When the strike off form reaches Companies House, the company should already be a shell. It should exist in name only with no debts, no assets, no employees, no open tax accounts and no remaining business activity.

Filing the DS01 application

Once the groundwork is complete the formal process is relatively simple. The directors complete form DS01 and submit it to Companies House with the required fee. Every director must sign it and failure to notify all directors is a criminal offence. You must also tell anyone who might be affected that you are closing the company. This includes employees, creditors, shareholders, banks, pension providers and HMRC.

Companies House will then publish a notice in the Gazette stating that the company intends to be struck off. There is a two month window during which anyone can object. HMRC frequently raises objections if they believe tax returns are missing or if they have compliance questions. Objections can also come from creditors, lenders, landlords and claimants.

If there are no objections the company is dissolved at the end of this period. The company name becomes available again and the business ceases to exist as a legal entity.

In my opinion the Gazette notice period is where most of the problems arise. If anything is outstanding, even a single unfiled return, the strike off can be blocked.

What happens if there are outstanding taxes

HMRC is one of the most common objectors. If payroll is still open, if corporation tax returns or accounts have not been submitted, if VAT returns are missing or if there are open enquiries HMRC will block the dissolution until the matter is resolved. This does not necessarily mean the company will face penalties but it does mean the strike off will stall indefinitely.

Directors who ignore this and allow a company to be struck off with outstanding taxes risk the company being restored later. Once restored HMRC can pursue liabilities, charge penalties and request late filings. The longer a company stays in this limbo the more stressful it becomes. In my experience this alone is reason enough to tidy everything up before applying.

What happens to remaining assets

Any assets left in the company when it is dissolved automatically pass to the Crown under a rule called bona vacantia. This includes money in the bank, equipment, property, intellectual property and even unpaid invoices. If a director forgets to distribute funds or fails to transfer property before applying for strike off those assets can be lost or require a costly company restoration.

To avoid this, the company should distribute all assets to shareholders before strike off. Distributions can be income or capital depending on the circumstances. If the total distribution is small and the company qualifies, using capital distribution can be tax efficient, sometimes with Business Asset Disposal Relief. Larger distributions may require formal liquidation.

In my opinion this is an area where professional advice is invaluable. The tax treatment of closing a company can make a significant difference to what shareholders actually receive.

When a formal liquidation is required instead

If the company owes money it cannot pay, liquidation rather than strike off is required. Attempting to dissolve a company with debts can be seen as an abuse of the process. A creditor can restore the company and pursue directors personally in serious cases. Liquidation also becomes the correct process where the company holds substantial assets because it allows for proper distribution and more favourable tax treatment in some circumstances.

Liquidation is more expensive and formal than strike off but provides directors with a clear, safe and legally compliant exit. In many cases it is the right route for closing a solvent company with high retained profits because it allows capital treatment for distributions.

How long closing a company takes

The actual strike off process typically takes around three months from filing DS01 to final dissolution, but this assumes no objections. If HMRC intervenes or if creditors object the process can take significantly longer. Liquidation can take months depending on complexity.

Where directors complete all pre-closure work in advance the process tends to move smoothly. Where they try to dissolve a company while issues are still outstanding the process is far slower.

Final thoughts

Closing or dissolving a limited company correctly is far more than filing a DS01 form. It is a structured process that requires the business to be wound down fully, its obligations settled and its finances brought to a clean end before applying for strike off. In my opinion the key to a smooth closure is preparation. A company that has stopped trading, paid its debts, distributed its assets and completed its tax filings will close easily. A company that still has unresolved issues will be stopped by HMRC, creditors or Companies House.

When done properly, dissolution can be a simple administrative end to a business. When done poorly, it can lead to restored companies, debt recovery, penalties and unnecessary delays. With the right approach you can close a company confidently and without complications.