Closing down Ltd Company - tax advice

neilio

I'm in the process of closing down my limited company after having been contracting for just under four years as I'm returning to permanent PAYE employment. I have been using E-Crunch as my accountancy firm. I've been able to keep track over the years of how much tax I've owed and how much dividend I can pay myself with regular reconciliation of my business bank account balance and transactions with what I record on the Crunch app site.

I ceased trading last week, I took all remaining dividend out that I was entitled to as income and any expenses owed to me so the balance of what I can withdraw from my limited company is now at zero. I have cancelled all direct debits.

Any remaining monies in my business bank account I have transferred out into my personal current account today, as instructed by my accountant, because as soon as Companies House informs my bank of the company's closure, all monies get sent to HMRC preventing me from paying any outstanding VAT or Corporation Tax.

What I don't understand is as follows:

The balance of my business bank account was approximately £23,000. None of that I am entitled to take as income for myself as salary, dividend, or other monies owed to me. I assume it should all go to HMRC in the form of Corporation Tax or VAT. However, when I use the Crunch software to deduce my running totals of VAT and Corporation Tax in the current period, VAT is approximately £3,500 and Corporation Tax is approximately £11,000. This means, after I've paid both tax bills, I will have approximately £8,500 of cash left, presumably to keep?

What is this £8,500? Is it dividend? How do I account for it? I'm sure that my accountant will explain this to me in due course but, because as I am using the Crunch accountancy service and generally I've no problems with them, they aren't a face-to-face individual who I have a personal rapport with to ask this question; everything is by email or pre-arranged phone call with essentially a stranger, so I wanted to do some pre-emptive research on this forum.

Thanks.

engineer_amy

If you are sure that all bills to your creditors have been settled, and VAT and CT paid over to HMRC, the remainder will be profit which will be taken as income or a dividend by yourself and tax should be paid on it accordingly when you come to do your self assessment for tax year 2016-17.


If your accountant has already given advice about clearing out the bank account prior to informing Companies House, I would ask him or her to put it in writing and confirm the next steps in writing to you, as you don't want to fall foul of the rules. I know a number of people who have had issues around the tax due on profit extraction form Ltd Cos and they have had an unexpected tax bill later on down the line.

neilio

Turns out I hadn't paid my Corporation Tax yet for the previous period. Oops. I've now done this and everything has (more or less) has settled at zero. Slightly disappointed that I didn't have a bunch of extra cash, even more annoyed with myself for missing the CT payment date. Just glad I could spot that there was something not quite right.