What happens to company assets when I close the business?

When a company closes, one of the most important steps is dealing with its remaining assets. These might include property, vehicles, equipment, stock, cash, or even intellectual property. What happens to these assets depends on how the business is being closed and whether it is solvent or insolvent. This article explains what happens to company assets when you close the business, the tax implications, and how an accountant helps ensure everything is handled correctly.

When you close a business, you must settle all debts, pay outstanding taxes, and deal with company assets before the company is officially removed from the register at Companies House. How you handle those assets depends on whether the company is solvent (able to pay its debts) or insolvent (unable to pay).

Understanding company assets

Company assets are anything the business owns that has value. Common examples include:

  • Cash in bank accounts.

  • Stock or inventory.

  • Property, machinery, or vehicles.

  • Office furniture and IT equipment.

  • Shares or investments.

  • Intellectual property such as trademarks or domain names.

These assets belong to the company, not the directors or shareholders personally. This means they must be accounted for and distributed correctly when the business closes.

If the company is solvent

If your company is solvent, meaning it can pay all its debts, you can close it voluntarily in one of two ways: striking off or Members’ Voluntary Liquidation (MVL).

1. Striking off the company

Striking off (also known as voluntary dissolution) is the simplest way to close a solvent company. You can apply to remove the company from the Companies House register using form DS01.

Before applying, you must:

  • Repay all creditors, including HMRC.

  • Distribute remaining assets to shareholders.

  • Close bank accounts and cancel VAT registration.

Any remaining assets when the company is struck off become property of the Crown, under a rule called bona vacantia. This means if you forget to distribute cash, vehicles, or equipment before striking off, you lose ownership and the assets pass to the government.

To avoid this, you should sell or transfer all assets before submitting the strike off application. Profits from asset sales are usually distributed to shareholders as dividends, and you may need to pay Income Tax on these distributions.

2. Members’ Voluntary Liquidation (MVL)

If the company holds significant assets (usually worth over £25,000), a Members’ Voluntary Liquidation can be a more tax efficient way to close. A licensed insolvency practitioner oversees the process and ensures all debts are settled.

After liabilities are paid, remaining assets are distributed to shareholders. In most cases, this distribution is treated as a capital gain rather than income, meaning shareholders may qualify for Business Asset Disposal Relief (BADR), which reduces Capital Gains Tax to 10% on qualifying amounts.

Assets can also be transferred to shareholders in kind, such as property or vehicles, rather than being sold first.

If the company is insolvent

If your company cannot pay its debts, the process is different. You cannot strike it off or use an MVL. Instead, you must enter Creditors’ Voluntary Liquidation (CVL) or be wound up by the court.

An insolvency practitioner will take control of the company, sell its assets, and use the proceeds to repay creditors in a legally defined order of priority.

What happens to assets in insolvency

  • Secured creditors (such as banks with charges over company property) are paid first.

  • Preferential creditors (employees owed wages or holiday pay) are next.

  • Unsecured creditors (suppliers and HMRC) are paid from any remaining funds.

  • If anything is left after debts are settled, shareholders may receive a distribution.

Directors cannot take company assets for personal use unless they have been properly valued, transferred, and approved by the liquidator. Attempting to do so could lead to penalties or disqualification.

What happens to assets you personally own

If you personally lent or leased assets to the company, such as a car or computer, these remain your property. You can reclaim them when the company closes, as long as you can prove ownership.

However, assets bought through the company with company funds are corporate property, not personal assets, even if used by directors. These must be handled through the liquidation or dissolution process.

Selling or transferring assets before closure

You can sell or transfer company assets before closing, but transactions must be at fair market value. Selling assets cheaply or gifting them to directors or shareholders could be seen as asset stripping, especially if the company owes creditors. HMRC or the liquidator could challenge such transactions.

If you sell assets, any profit may trigger Corporation Tax. If you transfer them to shareholders, they may face Capital Gains Tax or Income Tax depending on how the transfer is treated.

An accountant can help calculate the tax position for both the company and shareholders before any distribution is made.

Example in practice

A design company with £60,000 in retained profits and £15,000 worth of equipment decides to close. The directors settle all debts and use a Members’ Voluntary Liquidation. The equipment is sold for £10,000, and after paying final expenses, £70,000 remains.

The liquidator distributes the funds to shareholders as capital. Because the directors qualify for Business Asset Disposal Relief, they pay only 10% Capital Gains Tax on their share, saving thousands compared to dividend taxation.

Tax implications of closing a company with assets

When closing a company, tax may arise from:

  • Corporation Tax on profits from asset sales.

  • Capital Gains Tax for shareholders receiving distributed assets.

  • Stamp Duty if property is transferred.

  • VAT on sales of goods or assets during the winding up process.

Failing to plan for these liabilities can lead to unexpected tax bills after closure.

How accountants help when closing a company

An accountant ensures all financial and tax matters are dealt with properly before closure by:

  • Preparing final accounts and Corporation Tax returns.

  • Advising whether to strike off or liquidate.

  • Valuing and selling company assets.

  • Calculating tax liabilities and reliefs such as BADR.

  • Distributing funds to shareholders correctly.

  • Liaising with HMRC and Companies House.

They can also help ensure assets are sold or transferred in the most tax efficient way.

Conclusion

When you close a business, company assets must be dealt with carefully to ensure compliance with tax and legal requirements. In a solvent closure, assets are usually sold or distributed to shareholders. In insolvency, they are sold to repay creditors. Any remaining assets left unclaimed become property of the Crown.

With professional advice from an accountant, you can close your company smoothly, distribute assets fairly, and avoid unexpected tax or legal issues.