I have a client who ceased trading at the end of October (their year end) and wants to close down their limited company. They have made a loss in the final period, their reserves only stand at around £2k and they have already deregistered for Vat and closed their Paye scheme. No outstanding debtors/creditors other than our fee accrual. He is taking the assets to use in his soletrader business so I have disposed of the assets to him at NBV.
From what I understand, do I prepare accounts to their year end and then submit the CT return with terminal loss relief claim? Do I then have to wait until they have received their CT refund (and paid our fee!) before applying to strike off the company?
Regarding what is then in the bank account, this is classed as a capital distribution isn't it? Should this be taken before or after the strike off?
Apologies for all the questions at the moment. I've been working in practice for years, but always handed the job over to someone else at this point. Hopefully when I've got a bit more experience under my belt I'll be able to help other people too :)
Hi Rachel Have we ever had your prof background info? We usually ask new peeps but I know you have been around a while but cannot see anything. You mention being in practice - but can you expand on what role/qualifications. Just said to someone else - dont want to talk down, or indeed up to someone, so it helps to pitch answers.
Just one other thing until we have the above and other Qs back at you Im afraid - is transferring the assets at NBV the right way to go - or should this indeed be MV?
What ££ of loss? What position is the DLA in?
Edited re typo
-- Edited by Cheshire on Friday 5th of January 2018 02:30:31 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
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I'm ACCA qualified with practising certificate. I've previously worked at small practices doing the whole range of bookkeeping, tax returns, accounts, audits etc. I'm used to doing the work, then passing it over to a partner for the nitty gritty and admin sides! There's a whole other side of accountancy which I'm trying to learn quickly!
Good point on the assets, I'll have a look at what the MV would be.
The loss is only around £2k, the DLA is around £5k.
Hi Rachel
Thanks for the update. That helps! Would certainly bo good to have another ACCA on here especially as The Boss (aka Shaun) is awol so much at the mo.
Sorry another couple of Qs. Is the DLA credit or debit?
Also is the sole trade the same business as the Limited?
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
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I've got the accounts in front of me now. I've quoted the wrong figures in my original post (January brain!)
The loss for the year is £2400
The DLA is £1200 credit balance
The reserves are £950 insolvent, but I've not done the CT loss carryback yet, so that will be around £500
He will be continuing the same trade as a soletrader (electrician), but on a much reduced basis. He's in his early 60s and is winding down before retirement.
Thanks for your help with this Joanne, it's much appreciated. I can't seem to find the answers to this online and I'm far too scared to ask on Accountingweb!
Has he considered selling the limited company rather than closing it? The goodwill that he's amassed may pay more than he's going to make between now and retirement.
just a suggestion.
kindest regards,
Shaun.
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Shaun
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Assuming, for some reason, that isn't an option... He hasn't actually stopped trading, just disincorporated. My understanding (Shaun, can you confirm?) is that terminal loss relief is not available, under anti avoidance measures.
Edited to correct a word!
-- Edited by Cheshire on Sunday 7th of January 2018 06:11:22 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Hi Rachel Interestingly in the absence of a response to my last post, look what popped into my email box this morning on that very subject (sometimes it pays to be offline )
I was pondering on whether you should consider a members voluntary liquidation to gain the benefits of entreprenuers relief. But then you said the company is insolvent - but is that still the case given the above plus your changes to the 'sale' of the company assets? (dont forget adjustments to cap allowance/depreciation - if appropriate).
Its just that you can only have access to the strike off option and members voluntary liquidation if the company is actually solvent (a declaration of solvency needs to be sworn).
-- Edited by Cheshire on Monday 8th of January 2018 12:47:42 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Is that still the case if the only reason the company is insolvent is because the company owes the director money? There's not really any capital to draw out of the company, just his loan account.
How much are the assets worth at MV, as that will determine whether the company has made a loss or not. You originally said about 2k at NBV, but I think that is now £950 but is that MV or NBV
-- Edited by Leger on Monday 8th of January 2018 05:44:25 PM
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Hi John
The £2k (originally) and £950 were reserves rather than book values.
Hi Rachel
Going back a bit - ignore the entrepreneurs relief - sorry, I thought the 2 years restrictive bit following any claim was just preventing him from opening another limited, it also applies to switching to ST status so thats not an option for him anyway (Me being a numpty brain).
Also going back to an earlier Q - you need to have distributed the cash/assets prior to going down the strike off route otherwise they will end up in Queenie's coffers (Bona Vacantia).
So Im assuming there is enough to pay your bill and some of his DLA then thats those creditors sorted.
Strictly speaking - he is a creditor - but liquidation wont resolve anything if there are no more debts or assets to collect in. (Thats assuming everything that has been put through the DLA cannot be challenged in any way by HMRC).
Also - strictly speaking, if he waives his loan then it creates profit for the company which should have CT applied. But obviously any cash distributed to him and the transfer of asstes at MV (rather than NBV) will reduce his DLA so that his loan will almost zero so Im assuming that the write off would not be required (besides is there really much point and are HMRC going to argue the point over pennies).
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Sorry for not being around, self-assessments are taking priority at the moment unfortunately. Thanks again Joanne and John.
I've had a good look and the market value of his van is way higher than the NBV so I've now got a small taxable profit which there will be some CT to pay.
I've marked the CT return as cessation and sorted out the balancing charges on the assets.
So I'm now in the position where I've completed the year end accounts to cessation date.
I've disposed the assets at market value and debited the proceeds to his director's account which makes his director's account a debit of £283. I've put through a dividend of £283 to clear it.
After the dividend, reserves now stand at £100 share capital + £94 p&l = £194.
What comes next? Do I submit these accounts and CT return and get him to pay the outstanding tax (and our fee!). Then if there's anything left in the bank account he can draw that as a further dividend, then I apply for the strike off?
Thanks for all the help with this, it really does go to show that even though you may have worked in practice for years, it doesn't mean you know what you're doing!
Hi Rachel Sorry not been back on - had a family emergency. Will try to look at this again later in the week, unless you have sorted it, or unless someone else can assist in the meantime.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Assuming it is, yes get them to pay the tax and the fee then then download form DS01 from the Co House website. Send it off to Co House, together with a cheque for a tenner, and then remove what's left in the bank account and close it. It will then go in the London Gazette and, providing there are no objections, the Company will be dissolved after approx 2 months. As a safety measure, I would allow 2 to 3 weeks between paying the tax and filing the DS01 in case HMRC systems are a little behind.
Hi Joanne - hope everything is ok after your family emergency.
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John
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