From ltd co to sole trader - dissolving a company

SussexAccountancy

Hi

A new client has decided to dissolve her ltd company, and move back as a sole trader as her turnover is so small. I wondered if anyone could point me in the direction of what I need to do and a couple of specifics. I've read the CoHo document for striking off and dissolving a company, and technically it's all straightforward, but I have questions on the pure accountancy/tax side of it, which no-one seems to cover such as -

She bought some fixed assets (computers and printers) for £2000 last financial year - can we transfer them from the company to herself (presumably it must be at market rate?), and if so, I assume I need to consider personal NICs and tax on benefit as well as Class 1A NICs for company?

She also has profit retained of -£2700 whilst the company owes her around £4700 - the bank balance at the end of the year was around £600. She owes no monies to any creditors, and CT is not due for last financial year.


Any advice would be appreciated on the way forward, to making sure this is completed in the most efficient way, in time, taxation and fees!


Thanks, in advance, for any help,


Jo

jamesm96

Perhaps somebody with a better tax knowledge than me might set me straight here, but I don't think there's too much of a problem here...

She bought some fixed assets (computers and printers) for £2000 last financial year - can we transfer them from the company to herself (presumably it must be at market rate?), and if so, I assume I need to consider personal NICs and tax on benefit as well as Class 1A NICs for company?

Yeah I guess there is a potential P11d issue - one of the very first options on the P11d is for assets transferred and, for P11d purposes, these need to be recorded at cost / market value. However, if your client has £4,700 owed to her on her DLA, I'd say you could happily debit her DLA with whatever that market value is (so as to 'make good' the amount of the benefit and reduce the amount of the benefit to £nil), thereby avoiding a Class 1a NI charge.

In the company, presumably they claimed AIA last year so the written-down value of the computers is £nil. If the market value is, say, £1,500 then there's technically a £1,500 balancing charge on the disposal of the assets, but you simply bring forward the losses of £2,700 and that charge is more than covered.

Your client still has enough in her DLA to take the cash out of the bank too, and there's still an amount left on the losses; can this be carried back against a previous year so as to get some tax back?

Once the bank's empty, assets properly transferred and all creditors are definately paid, just submit the DS01 to Companies House along with their cheque. Make sure the bank is definitely empty though, the account will get frozen once the application to strike-off is processed and it'll be a pain in the neck to get any money out.

Hope that helps,

Mike.

Natsmomma

Great advice Mike. Especially the bit about freezing of bank accounts. Thank you . I have a client considering dissolving her Ltd Co so this is invaluable info.

lor

yeah I didn't realise it would freeze the bank account!. Defo make sure it emptied then if dissolving a limited company.