What happens to company assets when I close the business?

At Towerstone Accountants we provide specialist limited company accountancy services for directors and owner managed businesses across the UK. We wrote this guide for people running a company who want clear answers on tax, payroll, Companies House filing duties, and day to day compliance without jargon. Our aim is to help you understand your responsibilities, reduce the risk of penalties, and know when to get professional support.

Closing a limited company is rarely just an administrative exercise. In my experience as a chartered accountant one of the most misunderstood parts of the process is what actually happens to the company’s assets. Directors often assume that once trading stops everything simply disappears or automatically becomes theirs which is not the case.

When a limited company closes the assets still belong to the company until they are properly dealt with. How they are treated has tax legal and sometimes personal consequences for directors. In this article I will explain clearly what happens to company assets when a business is closed how different types of assets are treated and what you need to think about before taking any action. I am writing this in the first person based on real UK practice and aligned with guidance from HM Revenue and Customs and GOV.UK.

What counts as a company asset

Before looking at what happens on closure it is important to understand what HMRC and company law treat as an asset. An asset is anything the company owns that has value either now or in the future.

Common company assets include:

• Cash in the business bank account

• Equipment tools machinery and computers

• Vehicles owned by the company

• Stock or work in progress

• Property or long term leases

• Money owed to the company by customers

• Intellectual property such as websites trademarks or goodwill

Even small balances matter. I often see directors overlook things like a few hundred pounds left in the bank or an old laptop but legally these still need to be dealt with.

The company and the director are legally separate

One of the most important principles to understand is that a limited company is a separate legal entity. This does not change just because you decide to close it.

That means:

• Assets belong to the company not to you personally

• You cannot simply take assets without accounting for them

• HMRC will expect the correct tax treatment when assets are transferred or sold

Ignoring this separation is one of the fastest ways to create tax problems after closure.

The method of closing the company matters

What happens to assets depends heavily on how the company is closed. In the UK there are three main routes.

These are:

• Voluntary strike off

• Members’ voluntary liquidation

• Insolvent liquidation

Each route has different rules and tax outcomes and assets are treated differently in each case.

Closing a company via voluntary strike off

Voluntary strike off is the most common route for small solvent companies with minimal assets. It is often used where trading has stopped and the company has no significant liabilities.

Before applying for strike off the company must:

• Stop trading

• Settle all debts including tax

• Dispose of or distribute all assets

This last point is critical. Once the company is struck off anything left behind becomes ownerless and passes to the Crown under bona vacantia rules. I have seen directors lose money simply because they did not clear the bank account in time.

What happens to cash before strike off

Cash is usually the simplest asset to deal with. After paying all liabilities the remaining cash can be distributed to shareholders.

If total distributions are £25,000 or less HMRC generally treats this as a capital distribution rather than income. This often means Capital Gains Tax rather than dividend tax which can be more favourable.

If distributions exceed £25,000 the process becomes more complex and liquidation may be required for capital treatment.

What happens to equipment and physical assets

Physical assets must either be sold or transferred before strike off.

Common options include:

• Selling assets to a third party

• Selling assets to the director personally at market value

• Transferring assets as part of a final distribution

If assets are sold the company may realise a gain or loss which needs to be reported in the final Corporation Tax return.

If assets are transferred to you personally this is treated as a sale at market value even if no money changes hands. This can create a tax charge for the company and potentially a personal tax charge for you.

What happens to vehicles owned by the company

Company vehicles often cause confusion. If the vehicle is owned by the company it is a company asset regardless of who uses it.

On closure the vehicle can be:

• Sold and the cash retained by the company

• Sold to the director at market value

• Distributed to the shareholder

Each option has tax consequences. Selling below market value is not acceptable for tax purposes and HMRC can challenge it.

Stock and work in progress

Stock must also be dealt with properly. It cannot simply be taken home and forgotten about.

Options include:

• Selling stock as part of winding down trading

• Selling stock to the director at market value

• Writing off obsolete or unsaleable stock with evidence

Work in progress should be valued realistically and included in final accounts. This is an area where I often see mistakes that lead to HMRC enquiries later.

Money owed to the company

If customers owe the company money at the point of closure this is still an asset.

You need to decide whether to:

• Collect the debt before closure

• Write it off if it is genuinely irrecoverable

If you personally collect money after the company has been struck off HMRC may argue that income still belongs to the company which can cause complications.

Intellectual property and goodwill

Websites domain names branding and goodwill are all assets even if they are not shown clearly on the balance sheet.

If you intend to reuse these in a new business they must be transferred correctly.

This usually involves:

• Valuing the asset

• Selling or assigning it to the new owner

• Accounting for any tax consequences

Failing to do this properly can cause issues if HMRC later argues that income has been diverted from the old company.

Members’ voluntary liquidation and assets

If a company has significant assets or reserves a members’ voluntary liquidation is often the cleaner option. A licensed insolvency practitioner is appointed to wind up the company.

In an MVL:

• Assets are realised or distributed by the liquidator

• Distributions are usually treated as capital

• Business Asset Disposal Relief may be available if conditions are met

This route costs more upfront but can result in significant tax savings for larger companies.

What happens if the company is insolvent

If the company cannot pay its debts assets do not belong to the directors or shareholders at all.

In an insolvent liquidation:

• Assets are realised for the benefit of creditors

• Directors cannot take assets without permission

• Transactions before insolvency are closely reviewed

Trying to remove assets in this situation can lead to serious personal consequences including director disqualification.

Tax reporting after assets are dealt with

Even once assets are sold or distributed the company still has reporting obligations.

This usually includes:

• Final accounts to the date trading ceased

• A final Corporation Tax return

• Reporting of capital gains or balancing charges

• Personal tax reporting for shareholders

I always advise clients not to assume that once the company stops trading everything stops immediately. HMRC reporting continues until the company is formally closed.

Common mistakes I see directors make

Over the years there are a few recurring issues that cause unnecessary problems.

These include:

• Forgetting small bank balances before strike off

• Taking assets without recording market value

• Ignoring intellectual property

• Closing the company before final tax filings

• Assuming assets automatically belong to the director

Most of these mistakes are avoidable with proper planning.

How an accountant helps during company closure

This is one area where good advice can save far more than it costs. An accountant helps by:

• Identifying all company assets

• Advising on the most tax efficient way to distribute them

• Ensuring compliance with HMRC rules

• Coordinating timing of closure and reporting

• Reducing the risk of future enquiries

Closing a company is often emotional as well as technical especially if the business did not go as planned. Having clear guidance makes the process far less stressful.

Final thoughts

Company assets do not disappear just because a business closes. They need to be identified valued and dealt with correctly whether that means selling them distributing them or transferring them in a compliant way.

In my experience taking the time to understand this process and getting advice before making decisions protects you from unexpected tax bills and legal issues later. A well managed closure allows you to move on cleanly and confidently to whatever comes next without loose ends left behind.

You may also find our guidance on How do I close or dissolve a limited company correctly and How do I handle capital gains within a limited company helpful when exploring related limited company questions. For a broader overview of running and managing a company, you can visit our limited company hub.