A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
How to Close a Dormant Company
A dormant company is one that is registered at Companies House but is not trading and has no significant transactions. Many companies become dormant - perhaps after a project ends, or while the owners consider their next step - and then sit unused for years.
Closing a dormant company properly avoids ongoing compliance costs and keeps your records clean. The right method depends on whether the company is solvent and how much money it holds.
Is the Company Solvent?
A dormant company is almost always solvent - it has no debts and is not trading. This means you can close it simply and cheaply, without a formal liquidation.
Option 1: Strike-Off (Dissolution)
For a dormant company with no significant assets (under £25,000), a strike-off is the simplest route:
- Ensure the company qualifies - it must not have traded in the last three months, have no outstanding debts, and not be threatened with liquidation.
- Distribute any remaining assets to shareholders before applying.
- File a strike-off application (form DS01) with Companies House, signed by the majority of directors.
- Notify interested parties - creditors, shareholders, employees, and directors.
- Wait - after a notice period (usually three months), if no objection is made, the company is dissolved.
Option 2: Members' Voluntary Liquidation (MVL)
If the dormant company has £25,000 or more in assets, an MVL is usually the right route to secure capital treatment of distributions and avoid a large tax bill. The process is the same as for any solvent company closure.
What to Do First
- File any outstanding accounts and confirmation statements - Companies House will not dissolve a company with overdue filings.
- Pay any debts - the company must have no outstanding liabilities.
- Close the company's bank account once assets are distributed.
- Deregister for VAT and PAYE if applicable.
What It Costs
A strike-off costs nothing more than a small filing fee. An MVL costs more (from around £2,000 to £4,000 plus VAT) but can save significant tax for a company with substantial reserves.
Speak to a Licensed IP
If you have a dormant company you want to close, our Manchester-based practitioners will tell you whether a strike-off or an MVL is right - and handle it efficiently.